Settling an estate for a parent can be an overwhelming and inspiring process. All the needs involved are beyond the scope of this article and would benefit from talking to a financial advisor, estate attorney, tax advisor, or some other professional. But even then, these professionals may only help prepare you for the tactical or planning side of estate settlement.

The truth is, managing the inheritance process or administering a parent’s estate is also very emotional. Losing a loved one is difficult enough without also having to deal with everything that goes into administering an estate. There’s a lot to keep straight—both tactical and emotional—so here are seven things to keep in mind when settling a parent’s estate.

1. Proper Organization Will Come in Handy

Today, if you wanted to open an investment account for your own money, you would probably do most of the work online without paper. Transferring an asset for someone who is deceased to their beneficiary, however, is different. If you’re the executor of the estate, you likely will experience an overwhelming amount of paperwork: account applications to retitle the money, account applications for where you want the money to go afterward, death certificates, trusts, beneficiary forms, tax documents, checks, etc.

A good plan is to have a different colored folder for each asset with which you will have to conduct business. Take lots of notes, especially during any meeting you are having with someone you hired to help you. They may be good at what they do, but they probably will have done this many times, and you haven’t—this might be the only time you ever settle an estate. Also, try to keep paperwork associated with the estate separate from the paperwork of your normal life.

2. Your Parents Might Have Hidden Money from Each Other

Humans have strange habits sometimes. Your parents loved each other, but for some reason, they might have liked to keep a little money on the side. If they didn’t tell their spouse, they probably didn’t tell you. Unfortunately, this means you have to find it—if it exists at all. Common places people hide money are safe deposit boxes, in the basement or attic, in dresser drawers, or even electronic accounts where the statements are delivered via email. Monitoring all mail that arrives at the house, checking with any bank where there was a relationship, sifting through emails, and looking around the house will have to be done.

It’s also possible they hid the asset so well they forgot about it or didn’t know they owned it. Stock in insurance companies due to owning a life insurance policy that demutualized or old savings bonds are common examples. As you work with an estate attorney, they should be able to help you access state-run databases that store potentially abandoned assets. 

3. Taxes on Inheritance: You Might Pay Less Than You Think

One of the more common questions and concerns for account beneficiaries is how they will be taxed with this newfound money. Your easiest answer can and probably should be to talk to a tax advisor, but it’s likely you will pay less in taxes than you think.

We have what’s called an estate tax exemption at both the federal and state levels—however, it’s very high. States have varying exemptions, but the federal estate tax exemption for 2022 is $12.06 million. This means that if the assets totaled less than $12.06 million, there might not be any tax to retitle it into the beneficiary’s names, and the cost basis of the asset—like the house, for example—will become the value at date of death. Check these rules with a tax advisor for your state, as state exemptions can be much lower.

What could cause a taxable event, though, is if someone inherits an IRA or 401(k). Those do not receive a step up. Every dollar is taxable as income when it ends up in a beneficiary’s pocket, and if they distribute it all because they don’t know—or worse, you tell them there’s no tax, incorrectly referring to the estate tax—they might not be too happy.

4. The Person Who Passed May Have Meant More to You Than You Realized

Settling an estate, or having a family member pass, is about far more than money. That person represented something in your life. What they represented might not have been verbalized while they were alive, and you might not have even been aware of what it was until they were gone. It’s not too often you go up to Dad and tell him he represents quiet strength and calm in the face of uncertainty. You might get an awkward look. It probably should be said, but that’s not always how it works in life.

More than ever, finding tools to manage stress will help. Talk to friends you don’t see often enough, hug your family, get counseling, seek out nature, take care of your body, or do something that honors the person you lost and what they represented to you.

5. Your Parents May Not Have Been as Ready for This as You Thought

People don’t like to talk about money. This is no less the case with parents sharing their finances with their children. While they were alive, it might have appeared that they were confident in a plan, had organized their finances, saved enough for the survivor of the two of them, drafted proper legal documents, set out instructions for you as the executor, and made sure beneficiaries were named on all the assets to avoid probate, where possible. After they passed, however, you might find out they didn’t exactly take all these steps—or knew how to take all these steps.

If your parents have not yet passed, try to cover some of this with them. Have the difficult conversations to understand where the assets are, what they want to happen to the house, how the survivor will cover their expenses, if any organizations or charities should be beneficiaries, and so on. During this conversation, your goal is to listen—not to try to fix their finances. Respect the decisions they made and just understand what is supposed to happen when the day comes. 

6. Prepare for Disagreements

Money changes people. And if it doesn’t change your siblings, it might change your in-laws. This is a very emotional time, and different siblings likely will have very different views on how the estate should play out or how badly they think they need the money.

The house, for example, is a common source of disagreement. What happens if there’s a mortgage on the house? What if one of the siblings is living in the house, another wants to rent it for income, and another wants to know how soon they can expect their check from the sale of it? There isn’t an easy answer here. All you can do is hope for the best and communicate to all parties at the same time with the information you have. These scenarios are some of the many reasons estate attorneys are hired to help, even if your brother-in-law thinks it’s a waste of time, money and effort.

7. You Will Be a Different Person by the End—Financially and Otherwise

By the time this is all over, you will be a different person. You will be someone who managed the honorable task of finalizing another person’s affairs. You will have learned a lot about your family, and the deceased, even if they couldn’t tell you themselves. And from a financial standpoint, your own prior financial plan will need to be thrown out. Even if it’s a small sum you inherited, it matters, and it changes what opportunities you have available. If it’s a large sum, even more so.

People underestimate what they can do when they inherit money. Sometimes they even feel awkward spending it or considering it their own, and that could take years to get over. But the sooner you can clearly reassess your own goals, possibly with the help of a financial advisor, you might find you can finally do a wide variety of things you never could before. Maybe you can take a trip around the world, pay your house off, retire earlier, send your children or grandchildren to college, buy a beach house, renovate your home, hire coaches for your health, or start a nonprofit—just to name a few ideas. You would probably trade it all in to have your parent back, but it might have been the case they worked and sacrificed their whole life so you can do all these things now. Watching you will make them very proud.