CHAPTER LXX EXECUTORSHIP ACCOUNTING § 619. Executor's Accounts Similar to Those of Administrator Accounting by an executor differs from that by an administrator only to the extent that the recording of the slightly more complex duties of the executor requires more kinds of entries. The fundamental principles are the same for both; the same scheme of accounts is used, and the general form of the final accounting is the same. Such differences as do exist result from the fact that the executor is operating under a will which probably sets aside specific legacies and may provide for the creation of trusts, whereas the administrator merely realizes and distributes. The final report of the administrator accounts for the distribution of cash, of assets other than cash, and of income. The executor, on the other hand, must account separately for the specific legacies and the general and demonstrative legacies distributed. He accounts in the same way as the administrator for the distribution of income, but if a trusteeship is created he must account for the payments of income cash and corpus cash to the trustee, even if he himself is to perform both functions. § 620. Additional Accounts Needed by Executor To record this additional information, certain accounts are used by executors in place of the Distribution of Cash account, Distribution of Assets Other Than Cash account, and Distribution of Income account of the administrator. These with their uses are presented in the following synopsis: The general scheme of accounts differs from that of the administrator only in that payments to legatees on other than specific legacies are charged to Payments on General and Demonstrative Legacies. Payments or deliveries of specific legacies, on which the executor is entitled to no commission, are charged to Specific Legacies Distributed, while payments or deliveries of assets to the trustee are debited to Payments of Principal to Trustee if they will become part of the prin cipal of the trust, or to Payments of Income to Trustee if they are from income. In closing the books of the executor when an accounting is to be made, the first three of the above accounts are credited with amounts sufficient to balance them, the corresponding debit being to Estate Corpus, and the last two are credited with the amounts necessary to balance them, Income account being debited. § 621. General Books Kept by Executors As with administrators, any form of double-entry records in which the information required may be recorded will be adequate. The separate ledger, cash book, and journal are preferred to the synoptic, which is not so well suited to the accounts of executors because of the number of columns which would be required for the greater number of accounts. A cash journal can be used with great advantage by executors. § 622. Payments on Legacies If the executor is willing to pay to the legatees reasonable advances on their legacies, the estate funds being sufficient and there being no doubt of the estate's solvency, the payments are entered: Payments on General and Demonstrative Lega cies Cash $..... $...... The law in reference to paying legacies has been set out in Chapter XVII. Like the administrator, the executor must deduct the state inheritance taxes and pay over only the difference when the legacies are of cash, or collect the tax on the legacy when the legacy is of things other than cash. Specific legacies are handled differently from others because the executor is not entitled to his commission on them. The entry for the transfer of a legacy of assets other than Specific legacies distributed are entered in the fifth column of the Realization account. If an after-discovered asset (see § 586) constitutes part of a specific legacy, as a block of Liberty bonds when "all my Liberty Loan bonds" had been bequeathed to a nephew, the executor should appraise it properly (see § 301) and make the entry Specific Legacies Distributed... Assets Not in Inventory.. $....... $...... for the fair market value of the asset at the time of turning it over. § 623. Legatees Ledger When the legacies not specific are numerous or advances. made thereon are likely to be many, it is often advisable to keep a legatees ledger in the general style of any subsidiary personal accounts ledger such as an accounts payable (purchase), or accounts receivable (sales or customers) ledger. All payments made on other than specific legacies and charged to Payments on General and Demonstrative Legacies account should be posted to the legatees' account in this ledger. The total debits in this ledger will, then, always equal the debit amount of the Payments on General and Demonstrative Legacies account, and this ledger will be subsidiary to that account. The legatees are not credited until the books are closed (see § 629), when Payments on General and Demonstrative Legacies account is credited with the payments made. Even then, if certain legacies or parts of legacies of this type have not been paid, the full amount of the legacy will not be credited to the legatees' account. The credit will be the amounts of the payments only. For this reason the titles of the accounts in the legatees ledger should embrace memoranda of the amounts of the legacies. § 624. Inheritance and Transfer Taxes State inheritance taxes are an advance on legacies, whether or not they are to be collected from the individual legatees, because if not so collected they are a deduction from the legacy to the remainderman. Whether such taxes should be charged to Payments on General and Demonstrative Legacies, Payments of Principal to Trustee, or to Specific Legacies Distributed cannot, however, be told at the time of the initial estimated payment, as this cannot be divided among the legatees. Therefore this payment is best debited to Inheritance Tax Suspense until the true amount is ascertained. When the correct amount of tax has been determined and the state has refunded the difference, if any, the refund will appear as: Cash .... Inheritance Tax Suspense.. $....... $....... But if the determination of the exact tax shows that more is due than has been paid, the entry of the payment will be made as was that recording the first payment. When the exact tax has been determined, it is possible to divide the tax and charge it against the proper accounts, viz.: (1) Payments on General and Demonstrative Legacies ..... Inheritance Tax Suspense..... For the amounts which the executor will take as deductions from all except specific legacies. $..... $........ |