The attics of life: Picking an executor for your estate
I don’t generally follow the lives and scandals of celebrities. But when the death of a prominent personality sets off estate planning debates I’m all ear. Such was the case when actor Paul Walker died last November (see my blog post here) and again when the Los Angeles Times recently published an article about the tax debt for the estate of Michael Jackson.
Some background information: after Jackson’s death in June 2009 his executors valued the star’s net worth at slightly more than $7 million. The Internal Revenue Service, meanwhile, has arrived at a vastly different number: $1.125 billion. It deems the return filed by the pop singer’s executors inaccurate enough to justify a gross valuation misstatement penalty of $197 million. That is, of course, in addition to the $505 million the estate owes in taxes.
Discrepancies of such magnitude are extremely rare. In Jackson’s case they partially stem from the fact that a good portion of his assets include intangibles connected to stardom such as the value of his likeness. (The celebrity’s executors have placed the value at about $2,000. The IRS says it is closer to $400 million.) But since the IRS can levy penalties on the rest of us, too, there is a lesson to learn: not every executor is diligent about valuing an estate.
In general terms, the executor’s task is maybe best described as a combing through the attics of your life, literally and virtually. When the time comes he or she will inventory your assets, including your personal and digital property as well as your bank accounts and life insurance policies; she will notify the social security administration and your pension accounts of your death, cancel services and credit cards; she will appraise your estate, identify whether probate is necessary and ensure that death benefits are collected, taxes and debts are paid, and that your beneficiaries get their share of what’s left.
The qualities you might want to look for when eyeing potential candidates? Honesty and reliability are good places to start. Your executor should also be well organized, good with paperwork and conscientious about meeting deadlines. If the person you have in mind can never file his or her own taxes by April 15 you should probably keep looking.
How then do you find the right person? I suggest you make a list of all people you know and then rule them out one by one. The thing to remember is that a good executor will spare your beneficiaries from anxiety, disagreement, litigation and possible penalties — even if you aren’t Michael Jackson.
by Kevin J. Moore