Andrea’s kitchen table looked like a tornado had struck. Papers were strewn everywhere. For several hours, she reviewed bills, cancelled checks, bank statements, tax returns, and receipts, then she threw up her hands. “Darn it, Dad, I can’t do this. Why did you leave me with such a mess?” Finally, she called her friend, Sally, who was a bookkeeper.
When Sally arrived, she looked at the piles of paper and smiled. “Just what are you trying to do here, girl” she asked. Andrea shook her head. “I’m the executor of Dad’s estate and his lawyer wants all this paperwork sorted so we can settle his estate. He says I have to go through all of these bills and determine which ones were paid, and match invoices to cancelled checks and receipts. Then I have to find any outstanding invoices and debts, and figure out whether Dad had the resources to pay them. But Dad’s records are a mess. He didn’t even record the checks he wrote. And some of these invoices are really old. I don’t know where to start.”
Sally studied the mess. “You have to be methodical about it. First, create a pile of all the bills and invoices. Then look for any receipts, cancelled checks, or other verification a bill has been paid, such as bank statements, and create another pile. Finally, keep a separate pile for any evidence of checks your dad might have received or any automatic deposits that were made.
“You also need to create a spreadsheet or some sort of ledger. List all of the bills you found and then match them with cancelled checks and receipts. If you can’t find something, first check his bank statement and if nothing is there, call the company that sent the invoice and ask if the bill has been paid. If it has, request a receipt. If it hasn’t, create a separate category on your spreadsheet for unpaid bills or outstanding debt, noting the amount.”
“This is going to take forever,” Andrea moaned.
One the most important responsibilities of the executor of an estate is the formal accounting of the assets and liabilities of the decedent. Until that is completed, probate cannot move forward. And to ensure that probate proceeds smoothly once the accounting is done, it is important to document every step taken to verify liabilities and the existence of assets. It is also important to document the liquidation of assets to either pay the bills or create the ability to divide the decedent’s bounty among the heirs. Any transactions—such as the sale of assets—must also be recorded.
Much time is wasted in probate due to improper record keeping and inaccurate math. Some suggestions:
- Invest in financial software. Programs, such as Excel, do the math for you.
- Focus on the numbers. There is a tendency to rush when faced with a deadline. It is important to focus on the numbers: Check and recheck them. Accuracy is vitally important. When the numbers don’t balance, each entry has to be reviewed to find the error. That can take considerable time.
- Match every number to a source document. It is much easier to locate an error if every entry is matched to a source document, such as a receipt, account statement, correspondence, bills paid or pending, and photocopies of checks and deposit slips. Note the source on the spreadsheet, and file those documents filed and keep on hand.
- Document, document, document. Keep good notes on all expenses and transactions made on behalf of the estate, including dates, purpose, and the exact amount. And make sure to get a receipt.
- Deadlines are important, but if they can’t be met, it is important to contact your attorney as soon as possible. It is much worse to miss a deadline than extend one.
- Don’t take questions or challenges personally. If the estate closes and a mistake is later discovered, those who received disbursements may be required to reimburse the court to correct a deficiency. For that reason, your attorney and the probate court will review everything submitted very carefully. Discovering errors before an estate closes protects the heirs and the estate.
Conducting an accounting of an estate during probate is a technical process, one that requires attention to detail and above all, accuracy. When done well, probate proceeds smoothly. When done poorly, delay is almost guaranteed.