What Does Closing an Estate Mean?

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Closing an estate means that the work of administering the estate is done. This situation is reached only after the estate is properly inventoried, taxes are paid, all debts and other obligations are satisfied, and the remaining assets have been distributed via probate or other methods.

Estate executors in Pennsylvania must take one of two actions to close an estate. Find out more about what those actions are and when an estate is ready to close below, and learn how a probate lawyer may help with the process.

When Do You Close an Estate in Pennsylvania?

The first step in moving toward closure for an estate is finding any will left by the decedent. The decedent is the person who passed away. A will should name an executor and provide some details of how the decedent wanted his or her assets distributed among heirs. 

The executor should then complete tasks that include:

  • Probating the will. The will, death certificate, and other documents must be brought to the appropriate Register of Wills office. The documents are then entered into the register’s digital filing system.
  • Gathering assets. The executor works to discover all the assets of the estate and begins to create an accounting, or inventory, of those assets. That includes cash on hand and in accounts, real property such as homes, and other property like cars or personal effects.
  • Sending and publishing notices. The executor may need to publish notices in local newspapers and send notices to beneficiaries.
  • Conducting estate accounting. In some cases, the executor may need to file for tax ID numbers for the estate, open accounts in the estate’s name, and pay bills and debts from the estate.
  • Filing the Pennsylvania Inheritance Tax Return. Someone will need to file the Rev-1500 form and pay the applicable Pennsylvania inheritance tax.
  • Distributing remaining assets. Once all debts and other obligations of the estate are handled, the remaining assets can be distributed to heirs according to the will and probate laws of the state.

How Can You Close an Estate in Pennsylvania?

Once all the matters associated with the estate are handled and there’s nothing else for the executor to do, the estate can be closed. This is done via one of two methods.

Via a Formal Account and Audit

The executor, who is also known as the personal representative in Pennsylvania, prepares a formal accounting of the estate and how it was administered. This includes a statement detailing how the assets and liabilities of the estate were handled and administered.

A formal notice must be sent to all potentially interested parties, such as creditors and beneficiaries of the estate. That notice must indicate when the formal report will be presented to the court. This provides time for any interested parties to object to the closing of the estate. When objections are received, they are dealt with via hearings on each matter.

If there are no objections—or if all objections are resolved—the estate can be closed.

Via a Family Settlement Agreement

If the formal method of closing an estate sounds like a lot of work and a bit daunting, don’t worry. There’s an informal method that is generally preferred by many families.

This method involves the executor or personal representative creating a document called a Family Settlement Agreement. This document should also include an account of the assets and liabilities of the estate and how they were handled, but it doesn’t need to be as formal and stringent as the formal account and audit in the above method.

Ultimately, the Family Settlement Agreement is a contract. The heirs of the estate sign it, indicating that they agree with how the estate was settled and also agree that it can be closed.

In many cases, other provisions are included in the contract. The personal representative can include a clause indemnifying them, which means the heirs agree not to hold the person responsible in the future if any honest errors are uncovered about the estate. The agreement might also detail payments to be made to the executor for their work on the estate.

A Family Settlement Agreement is an easier and less expensive way to close an estate. It doesn’t involve courts and hearings and allows the estate to be closed quickly. In many cases, the only reason to move to a formal audit is because the personal representative can’t get all the heirs to sign an agreement—for whatever reason. It may be that someone has refused to do so, for example, but it could also be that the executor has been unable to locate a specific heir or get them to respond to communication efforts.

Get Help From a Probate Professional

When a loved one dies, families can deal with a lot of emotion and stress. Piling complex estate administration and probate tasks onto an already difficult situation can create more stress and additional challenges. Yet, letting an estate sit without attending to it can also lead to issues.

If you find yourself in this conundrum, consider reaching out to an experienced professional for assistance. Contact Karen Ann Ulmer, P.C., attorneys at law, today to find out how we can remove some of the burden from your shoulders.

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Is It a Valid Will?

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There are only a few requirements for a will to be valid in terms of its drafting. It must be in writing and signed by the testator at the end. Technically, a notary and/or witnesses are not required, though certainly useful for purposes of probate as well as potential litigation on its validity. The bigger concerns surround the contents of the will. Any aggrieved party can contest the will for a number of reasons. Two of the more common grounds for a will contest include indue influence or lack of capacity. Undue influence covers a variety of situations where the primary allegation is the contents of the will do not reflect the testator’s true intent. This could be because of direct undue influence, i.e. physically forcing the testator to execute a will. It can also be a result of indirect influence. Indirect influence may be asserted if the testator was shown to have persistent confusion or forgetfulness, a party with a close relationship is involved, and the end result is a lopsided will to the substantial benefit of the party with close relationship.

 

Lack of capacity can be asserted wherein it is alleged the testator did not have the mental awareness to execute the document. By law, a testator must be of sound mind to make a will. This has been construed by case law to require they understand who their intended beneficiaries are, what property they have to pass to the beneficiaries, and how they will divide the property among the beneficiaries. There is a presumption of capacity but it can be overcome. To overcome the presumption there must be clear and convincing evidence to demonstrate lack of capacity at the time of signing. Witnesses at the time of signing can offer testimony with regard to the state of the testator at the time with respect to capacity. Consult with an estate attorney if you have concerns about the validity of a will to discuss your options.

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Estate Planning after Divorce

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It makes sense to revisit your estate plan after any major life change, including new child, marriage and divorce. You want to ensure you are leaving your assets to the individuals you intend to and that can change over time. Sometimes, individuals do not get around to updating their plan leaving their heirs to deal with the fallout. Luckily, in the case of divorce, there is some protection offered by law. Specifically, any provision in a will relating to the testator’s spouse will become ineffective upon divorce unless it is clear the provision was intended to remain post-divorce. The same is true if the testator is in the midst of divorce proceedings and grounds for divorce have been established. Establishment of grounds is by order of the court and requires more than just the filing/service of a divorce complaint.

 

The rule for wills is also applied to beneficiary designations. The law provides that any designation naming a prior spouse shall become ineffective upon divorce. However, a prior spouse would still be entitled to receive their share of the asset if awarded to them pursuant to equitable distribution, where applicable. Your estate plan may also be automatically modified in the event of marriage. If a testator marries after making a will, the surviving spouse shall at least be entitled to what they would have received without a will if they are not named. Intention is also a factor here. If the document notes the upcoming marriage, the law does not apply to change the will.

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Disclaimers vs Renunciations

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Disclaimers and renunciations are forms that can impact the administration of an estate. As is true with all legal paperwork, the best policy is to consult with an attorney before signing. If you elect not to consult with an attorney, at least be aware of the purpose of each form. A renunciation is used where an individual who has been named as an executor declines to serve in that capacity. You may name the individual who should serve in your place unless a contingent executor as already been named. In the case of an individual passing without a will, the next of kin would be first in line to serve as administrator of the estate. This individual can also sign a renunciation to waive their right to serve and allow someone else to serve. If there are issues with the person who stands to serve and a refusal to voluntary renounce their position, any other individuals with an interest in the estate can still petition the court to address their concerns.

A disclaimer is used to waive your right to receive an inheritance. Being named as a beneficiary or being an heir at law does not mean that you have to accept what is designated to go to you. It is possible to decline to receive your inheritance. The result of a disclaimer is that you are treated as if you predeceased the decedent. A will or the laws of intestacy would dictate how your share would be distributed among other beneficiaries. A valid disclaimer must be in writing. It must adequately identify the decedent and the asset or amount being disclaimed. It is possible to do a full disclaimer or a partial disclaimer where you only refuse certain assets or a certain amount. The disclaimer has to be served on the person handling the estate, such as the executor or administrator, and/or filed with the court. A disclaimer is irrevocable so be sure of your decision prior to executing the document.

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Avoiding Probate

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Probate is the process wherein a decedent’s will is presented to the appropriate county office and the named executor is formally sworn in to handle their estate. Probate can also occur if a decedent passes without a will in which case their next of kin can apply to serve as the administrator of their estate. There are a number of steps to take and potential costs involved to complete administration of an estate once formally probated. Depending on the nature of assets and debts of the decedent, probate can sometimes be avoided. It is key to consult with an experienced estate attorney to see if this is possible.

A good estate plan can also eliminate the need for probate. An individual can make plans during their lifetime that may eliminate the need for any probate after their death. For example, they can funnel their assets into non-probate assets which include assets that have a beneficiary designation or payable on death designation. They may also consider titling assets with another individual as joint tenants with rights of survivorship. A trust may be a good fit such that assets are held in trust and not in the name of the individual, with instructions on how the trust should operate following the death of the person creating and funding the trust. Identifying a good estate plan is also very case specific and should be discussed with an experienced attorney as well as a financial planner and/or tax advisor.

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