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Final Expenses Money is needed to cover the final expenses associated with death. Include are funeral and burial cost, such as funeral home fees, casket or crematorium expenses, burial plot and others. Final expenses also include any other costs that are directly related to the death. For example, depending on the circumstances of death, the family might be liable for uninsured medical expenses, such as hospital and physician charges. Furthermore, death often is the catalyst for creditors to seek immediate payment of outstanding debts that would otherwise continue to be paid out of the business owner's ongoing income from the business. Back to top Administering the Individual's Estate Death also creates the need for funds to pay expenses associated with administering the estate of the deceased person. An individual's estate consists of all real estate and personal property, including money and other financial instruments, that the person owned while living and other financial instruments, that the person owned while with administering an estate include legal fees, debt payment, federal estate taxes and any state mandated death taxes. In addition, the person who actually administers the estate the executor or administrator usually is entitled to receive a fee for his or her work as well as to have access to funds that allow the estate to be closed. For example, the executor might be required to order and pay fees for legal document or to pay court costs associated with finalizing the estate. The point is that, when a person dies, some expenses will be incurred; the law requires certain transactions to take place, and these transactions produce a price tag that must be paid by the deceased person's estate. The point is that, when a person dies, some expenses will be paid by the deceased person's estate. Back to top Executor or Administrator? Before we continue, let's distinguish between an executor and an administrator of an estate. When an individual who dies has a legally executed will, he or she usually has named a specific person to take charge of finalizing the estate. Such a person, when named in a will, is known as the executor. If the will does not name an executor or if the individual has not executed a will, the appropriate court of law names someone to perform the same duties. That person is known as the administrator. The difference between an executor and an administrator is essentially a legal technicality; the duties are the same. For your information, original legal terminology distinguishes between males and females. The feminine version of these titles are executrix and administratrix, terms that may or may not appear in modern legal documents. Back to top Probate Another term associated with estate administration is probate. Technically, probate refers to actions that occur in a court of law in order to determine whether or not a will is valid. However, in contemporary usage, the term is more often used to refer generally to all activities that occur in administering an estate, not just those that prove or disprove a will's validity. Therefore, when you hear that an estate is "in probate," this usually means the executor is carrying out the process of collecting and liquidating assets, paying debts and taxes, and distributing the remainder of the estate to heirs in accordance with the will and/or state laws. Back to top Estate Administration Requirements and Problems State laws usually require the estate executor or administrator to finalize the deceased person's affairs quickly. The executor must, by law, use whatever assets are available to pay all debts, including those outstanding at the time of death, those incurred for funeral costs and other expenses associated with the person's death, and taxes owed by the estate itself. Unless the business owner has planned carefully provided a financial mechanism for dealing with the business after death, the estate administrator may have no choice but to liquidate some or all of the business assets in order to close the estate. While partial liquidation may be necessary, the result can be a disaster for the heirs. First of all, a small business, especially, may be financially weakened by the death of the owner, making it difficult or impossible for heirs to continue business operations or to have sufficient income for day-to-day living expenses. Secondly, the same circumstances could result in the business being stripped of significant assets, effectively making it worthless to potential buyers. In either event, two of the original options available to the heirs upon the death of the owner -- continuing the business and selling the business -- may not be viable, leaving dissolution of the business as the only alternative. Back to top Living Expenses In addition to the cash needs that arise solely because of the business owner's death, additional cash is required to cover the normal and on going income needs of the survivors. For small business owners, chances are high that the business provided regular income to pay for everyday personal living expenses-mortgage and utility payments, groceries, transportation expenses, schooling, clothing, credit card and installment loan payments, and so forth. While savings accounts and income from investments might provide temporarily for everyday needs, the heirs of many smaller businesses from investments might provide temporarily for everyday needs, the heirs of many smaller businesses may be unable to survive for long periods without the steady income the business formerly provided. Back to top |