My own layman’s guide, born of my own experience and observations – Part 9

 First, let me apologize. This article is sure to upset someone.


When it comes to administering an estate, the general thinking feeling is, but Granny would have wanted it that way!

 The law, however, contends that if Granny had wanted it that way, she should have written it into her will; if she did not write it into her will, it doesn’t count.

Generally speaking, most wills authorize the executor/administrator to pay the bills and distribute the assets. Generally speaking, “bills” include continuing to pay the mortgage and utilities for the house, car payments, final medical expenses, and formal debts and credit card obligations, plus final expenses (see the article on Estate Funeral Expense.) It also includes legal fees such as fees to the county surrogate for paperwork. (A separate article for “bills” is in this series somewhere.)

Sometimes a will has a specific provision such as: Give $10,000 to Baby Huey. Unless the will specifically says this, you can’t just give $10,000 to Baby Huey. Let’s say Granny was in the habit of giving $10,000 to Baby Huey every year on his birthday. Granny dies a week before Baby Huey’s birthday. If Granny had already written the check and mailed it, the check should be honored. But if Granny did not yet write the check, unless the will specifically provides for another $10K, the estate cannot give Baby Huey another $10K.  Sorry, kid.

Sometimes a will has a specific charitable provision such as: Give $50,000 to my church/local animal shelter/most-feared-disease. Unless the will specifically says this, you can’t just give $50K to Granny’s church/local animal shelter/disease.  Let’s say everyone knew Granny was gearing up to give $50K to her church, but she died before she wrote the check. Sorry, but unless the will specifically provides for this gift, the estate cannot write the check.

Let’s go one step further. Let’s say the heirs notice an art sale and there are beautiful prints of Granny’s favorite lighthouse. Everyone agrees that Granny would love it if they all had one of those prints, so they buy them using estate money. Once again, unless the will specifically instructed them to find beautiful prints of Granny’s favorite lighthouse for each heir, this is not a valid expense.  Instead, it would be considered an early distribution.

Why does it matter?

Only legitimate expenses get to be included on the various tax forms.  Only legitimate expenses can reduce the tax liability!  Put it another way:  a distribution does not reduce tax liability.

If the estate mistakenly writes a check to Baby Huey or to Granny’s church, or buys beautiful prints of

Granny’s favorite lighthouse, the amount has to be treated as an early distribution, equitably divided among Granny’s legal heirs. Serious! The amount does not count as an expense, or as a charitable contribution. It can’t be used to reduce estate taxes or income taxes on either the federal or the state level.

Worse, if an amount is considered to be an early distribution, it does not become a charitable contribution for the heirs when the heirs do their taxes, even if the check is written to a bone fide charity. In order for someone to get a charitable contribution deduction, that someone has to write his/her own check.

There are plenty of other issues when settling an estate, but they will be treated in separate articles.  Surely this is enough bad news for one article!