Thursday, July 23, 2015

Three Costly Mistakes Estate Executors Need to Avoid

Anyone without knowledge of estate administration and associated tax laws can easily make costly mistakes.

Failure to Value Assets Correctly.  

Valuing assets incorrectly can be costly, time-consuming and create personal liability for an Executor or Administrator. Selling the asset based on a value too low may cost the estate the difference in fair value versus the incorrect, low value. If the asset is valued low for Pa. Inheritance Tax but then sold for a higher, fair value, there will be income tax on the difference (gain) in value and the income tax rate will be higher than the Pa. inheritance tax rate. In both cases, the Executor or Administrator will have cost the estate heirs a loss. Valuing an asset too high can result in over payment of  Pa. inheritance tax and a delay in selling the asset. When the asset is finally sold after long delay and at a lower price, heirs will be frustrated by the over-payment of tax and disappointed by the final sale price. Obtaining accurate date-of-death value of assets requires both knowledge of the laws and regulations governing valuation and the correct sources to use to obtain accurate values.

Failure to Liquidate Assets Timely. 

The duty of the Executor or Administrator is to preserve asset value for the heirs. Holding an asset, like stock which is subject to fluctuation of value, is dangerous and can often result in loss of value. In one estate the Executor delayed in liquidating the stock for over 90 days and the stock went down in value by $50,000. This caused significant problems for the Executor. If the Executor or Administrator is found to have delayed in liquidating the asset without a proper reason, he may be held personally liable for the loss.

Failure to Apportion Taxes Properly Among Heirs. 

Executors and Administrators need to carefully follow the estate and inheritance tax allocation language of the will, or if there is no provision for it, then must follow the law for distribution of tax liability among heirs. Improper allocation will, at best, create unhappy heirs and, at worst, impose liability on the Executor or Administrator if final distribution to heirs was made without proper releases or court order.

If you want assistance, legal representation, or just want to know more about R. Kurtz Holloway or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at

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