How to properly document and file receipts for payments to heirs or service providers in an estate

Disclaimer: This article is educational only and is not legal advice. If you need help with a specific estate administration, consult a California-licensed attorney or the probate court.

Detailed Answer — practical steps for California estate administrators

When you act as a personal representative (executor or administrator) or as a trustee handling estate affairs, you act as a fiduciary. You must keep clear, accurate records of all estate transactions, including payments made to heirs or to vendors and service providers. Good recordkeeping protects you from disputes, supports court accountings, and helps with tax reporting.

1. Open and use a separate estate account

Deposit estate receipts and make all estate payments from a dedicated estate bank account. Do not commingle personal funds and estate funds. Using a separate account creates a clear paper trail (bank statements, canceled checks, electronic transfer records).

2. Create contemporaneous documentation for every payment

For each payment, keep one or more of the following as appropriate:

Invoice or bill from the vendor or service provider showing date, description of services or goods, and amount.
Signed receipt from the payee (for payments to heirs or informal service providers). The receipt should state: date, amount, purpose (e.g., “reimbursement for funeral expenses” or “final distribution”), name and relationship of payee to decedent (if applicable), and a signature.
Cancelled check or cleared electronic funds transfer record showing payee and date.
Copy of a written contract or signed engagement letter for professional services (attorney, CPA, contractor).
Written approval or court order if the payment was made after court authorization or if the payment was an extraordinary transaction.

3. Use plain, specific descriptions

Label each receipt and ledger entry with specific information: “reimbursement for cemetery plot paid to J. Smith on 6/1/20XX” rather than vague notes like “paid J. Smith.” Specific descriptions help the court, beneficiaries, and tax preparers quickly understand the purpose of each payment.

4. Document payments to heirs carefully

If you pay an heir for services (e.g., minor repairs, personal care) or reimburse them for out-of-pocket expenses, get a signed written receipt or invoice. If you make a distribution to an heir, obtain a signed receipt and, if appropriate, a written release or acknowledgment that identifies whether the payment is:

A final distribution of estate property;
A repayment or reimbursement for identified expenses; or
Payment for services rendered (including the agreed rate or contract).

If an heir who is also a service provider is paid, document the reason the arrangement is fair and reasonable and, when in doubt, get court approval before payment.

5. Keep source documentation for expenses

Save receipts, contracts, timesheets, and before/after photos for work that affects estate value. When possible, use estimates and written bids for contractor work and attach invoices showing work completed.

6. Prepare ledger entries and periodic accountings

Maintain a running ledger (spreadsheet or accounting software) that records date, payee, amount, category (e.g., funeral, mortgage, taxes, distribution), source documentation reference, and check or transaction number. For probate estates you will usually prepare a formal accounting for the court or respond to beneficiary inquiries. See California Courts resources on probate administration for forms and guidance: courts.ca.gov — Probate self-help.

7. Tax reporting and vendor forms

Collect Form W-9 from independent contractors or vendors you pay (when requested) and issue Form 1099-NEC for nonemployee compensation where required by the IRS. For guidance on 1099 reporting, see the IRS page: IRS — About Form 1099-NEC. Keep tax-related documents (K-1s, 1099s, estate tax filings) with your receipts.

8. Court accountings and evidentiary support

If you must file a petition for final distribution or periodic accountings in probate, attach or have available the underlying receipts and vouchers that support each line-item entry. For trust administration the California Probate Code requires notice and accounting procedures for beneficiaries; for example, see California Probate Code § 16061.7 (notice of administration) and § 16061.8 (accounting options): Cal. Probate Code § 16061.7, Cal. Probate Code § 16061.8. While those two sections address trusts, the same record standards and beneficiary rights often inform estate accountings in probate.

9. When to get court approval

Seek court approval before making unusual payments, paying an heir for services at above-market rates, or distributing contested assets. Approvals limit later challenges from beneficiaries and protect you from personal liability.

10. Retention period

Keep originals and electronic copies of estate records until the estate closes and for several years afterward. While California does not set a single universal timeframe for all estate records, a common practice is to retain records for at least seven years to cover potential tax audits and creditor claims. Ask an attorney or accountant for a retention period tailored to your situation.

How to file and present receipts to the court

Organize receipts by transaction date and category (income, expense, distribution).
Scan or copy originals; keep originals in a secure file. Number or label each receipt and refer to those labels in your ledger and accounting schedules.
Prepare a summary schedule (spreadsheet or court accounting form) that totals categories and cross-references each total to supporting receipts and invoices.
When you file a formal accounting with the probate court, follow local court rules about exhibits—attach receipts as exhibits or have them available for the court and interested persons. See California probate forms and filing info: California Courts — Probate Forms.

Common scenarios and best-practice receipts

Examples of good receipts:

Reimbursement to heir for funeral bill: include vendor invoice, paid check from estate account, and a signed receipt from the vendor or heir noting reimbursement.
Payment to a handyman hired by an heir to secure property: use written agreement, invoices with hourly rates, photos of work, and a cleared check from estate account.
Distribution to an heir: signed receipt from heir showing what was received, reference to estate docket number if in probate, and notation whether distribution is in-kind or cash.

Legal resources and further reading

California Courts — Probate self-help and overview: https://www.courts.ca.gov/selfhelp-probate.htm
California Probate Code (trust notice and accounting provisions): Probate Code § 16061.7, Probate Code § 16061.8
California Courts — probate forms: https://www.courts.ca.gov/forms.htm?filter=probate
IRS guidance on 1099 reporting: https://www.irs.gov/forms-pubs/about-form-1099-nec

When to consult an attorney

Contact a probate attorney if:

You face a dispute about a payment or distribution;
You plan to pay an heir for services and want to avoid later challenges;
You encounter complex tax questions or large, unusual estate transactions; or
You need to petition the court for approval of fees, reimbursements, or distributions.

Helpful Hints

Always pay estate expenses from the estate account and save the bank evidence.
Get signed, dated receipts that state the purpose of the payment.
Keep a searchable digital copy of each receipt and link it to the ledger entry.
Label receipts consistently (e.g., “E-2023-01 Reimbursement – Funeral – Vendor Invoice #123”).
When an heir is paid for services, document the agreement in writing and, if reasonable, get a second estimate to show the price was fair.
Ask vendors and contractors for W-9s up front to simplify year-end tax reporting.
If a payment is approved by the court, keep a copy of the order with the receipts it authorizes.
When in doubt about whether to get a signed release from a beneficiary, get one—consent reduces future disputes.

Clear, contemporaneous records and conservative procedures protect both the estate and its administrator. When administration gets complicated, a short consult with a California probate attorney can prevent costly disputes and personal liability.