Inventory of Estate

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An inventory must be filed with the court in the course of administering an estate. This task would be the responsibility of the executor or administrator of the estate. The inventory should identify all probate assets of the decedent at the time of death. This may require some investigation by the executor/administrator. Ideally, the decedent would keep a list of all assets and debts along with their will. They make go a step further and include user name and passwords for their accounts along with this list since a majority of account maintenance and monitoring now happens electronically. If there is not a list provided, a good starting point is to monitor the decedent’s mail for evidence of statements for accounts.

The inventory filed with the court should include the value of the assets listed as of the decedent’s death. You can contact the respective institutions to request a date of death balance if not otherwise ascertainable by the statements available. The inventory is to be filed with the court within nine (9) months from the date of death unless an extension is granted. If additional assets are discovered after filing the initial inventory a supplemental inventory should be filed with the court.  By April M. Townsend

 

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Intestate Succession

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Chapter 21 of Title 20 outlines the order in which surviving relatives would inherit from a decedent. If the decedent was married and there is no surviving issue (child) or parent, the entire estate goes to the surviving spouse. If there is a surviving parent, the first $30,000 of the estate along with half of the balance would go to the surviving spouse. The other half of the balance would go to the parent(s). If there is surviving issue or children born to the decedent and the surviving spouse, the spouse gets the first $30,000 and the balance is split between the spouse and the children. If the surviving children are not born to decedent and surviving spouse, the entire estate is split between spouse and children.

If not married at the time of death, the decedent’s estate would pass in the following order: (1) surviving issue of the decedent; (2) parent(s) of the decedent; (3) brothers, sisters or their issue; (4) grandparents (half to paternal and half to maternal); (5) uncles, aunts and their issue; (6) the Commonwealth. The class to which the estate would pass is relevant for inheritance tax purposes. There is no inheritance tax for an estate passing to a spouse. There is a 4.5% tax for estate passing to lineal descendants (e.g. children or parents). There is a 12% tax for siblings and a 15% tax for all other relatives.

 

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Gifts of Assets

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Each individual is permitted to gift $15,000 in assets each year without tax implication. $15,000 is the annual cap for federal gift tax purposes. There is not a gift tax in Pennsylvania. Even individuals who gift above this yearly threshold, may not need to pay taxes. Amounts in excess of the yearly limit can be assessed against that individual’s lifetime gift tax exclusion. Presently, the lifetime gift tax exclusion is 11.18 million. Most individuals will not exceed that sum over the course of their lifetimes.

You should be aware that gifts made within a year of death may be subject to Pennsylvania inheritance tax depending on the amount and nature of the gift. There are some gifts that are non-taxable and do not count against your annual exclusion or lifetime exemption. Gifts between spouses can be unlimited. Payments for tuition or medical expenses paid directly to respective institution or facility on someone’s behalf are not taxable. Gifts to political organizations and charities are also under the umbrella of non-taxable gifts. Any individual making a taxable gift above the annual exclusion must complete Form 709, the Gift Tax Return. Filing of the return does not mean any taxes are due however if still within your lifetime exemption. Consult with an experienced estate planning attorney to make further understand your options in making gifts as part of your estate plan.  By April M. Townsend

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Family Settlement Agreement

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The family settlement agreement is a document that can be filed at the conclusion of administration of an estate wherein the beneficiaries accept their distributions and release the executor or administrator from any liability for their handling of the estate. Often, an informal accounting will accompany the settlement agreement so all interested parties can review the administration of the estate. The document would also clearly state the distributions of the net assets of the estate. With respect to cash assets, this may be accomplished by specific dollar amount or by percentage.

One of the benefits of finalizing estate administration by agreement is fewer filing fees and legal fees since less paperwork is filed with the court and a court hearing is not required. Executors or administrators should still publish notice of the estate for any potential creditors and wait one (1) year before distribution. It is possible to allow distributions prior to the one year mark from notice of the estate. In that scenario, it is important to include language that beneficiaries will return funds as needed if a valid creditor is subsequently identified and makes a timely claim against the estate.

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Debts of Estate

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Prior to any distributions of the assets of an estate, the debts of the estate should be reviewed. Section 3392 if Title 20 discusses the priority for payment of the debts of an estate. First, the costs of administration should be covered. These costs can include filing fees for the probate process, attorney fees, advertisement costs and compensation for the executor or administrator. Next, the family exemption of $3,500, applicable in the case of a surviving spouse or children living with decedent at the time of death, is paid. Next, the costs for the decedent’s funeral and burial are to be paid. This can include costs incurred through the funeral parlor, the cemetery, flowers for immediate family and funeral luncheon.

Next in the line of debts to be paid would be medical costs for the decedent for the last six (6) months followed by cost of grave marker and then any rent owed on decedent’s property in the last six (6) months. The final category is any debt owed to the Commonwealth. Other debts in the decedent’s individual name, such as credit cards, are at the bottom of the list. There may also be instructions to pay inheritance taxes from the residue of the estate prior to distribution. It is important to pay these debts in order of priority in any case but particularly where there may not be enough assets in the estate to pay all the debts.

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Bond for Estate

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You may be required to post bond if the last will and testament does not waive the requirement, if you as the executor or administrator reside out-of-state, or if beneficiaries of the estate are minors. The purpose of posting bond is to ensure the administration of the estate is carried out properly. Specifically, to protect any beneficiaries or creditors from harm based on any negligence on the part of the executor or administrator. The required amount of the bond is based on the total estimated value of the estate and the executor or administrator usually only needs to post a percentage of the total bond.

Many insurance companies are able to assist in obtaining bond. The insurance company would then pay out the value of the estate if the administration is faulty based on the acts, or omissions, of the executor or administrator.The court may have a list of local agents that routinely do estate or probate bonds. A credit check may be required in applying for bond. The application often includes inquiries into the overall financial status of the executor or administrator and their personal assets. The executor or administrator can be released from bond upon proper completion of the administration of the estate. The court may need to formally grant release from bond which would require a petition for release to be filed. The principal posted for the bond can be returned if the executor or administrator had not done anything that resulted in loss to the estate.

 

 

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Self-Proving Will

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A last will and testament is a legal document that directs how your affairs should be handled after you pass away. The document allows you to specify who you will leave your assets to and in what amounts or shares. You can also designate an individual to be responsible for carrying out the terms of your last will and testament. This person called an executor, or if female, an executrix. Make sure your loved ones know where you will is stored to be able to access it at the appropriate time. Your original will is to be provided to your county’s Register of Wills or Surrogate Office to begin administration of the estate.

A self-proving will is one that has been witnessed and signed in the presence of a notary and includes an affidavit regarding the circumstances at the time of execution. Pennsylvania and New Jersey require at least two (2) witnesses. Prospective witnesses should be disinterested, meaning they are not beneficiaries of the will and have no individual interest. The affidavit acknowledges the presence of the witnesses at the time the will was signed, that the will was executed voluntarily and that to the best of their knowledge, the individual executing the will was of sound mind. Having a self-proved will can reduce the likelihood of will contests during estate administration and streamline the process in terms of not needing to further verify the will.  By April M. Townsend

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Refusing an Inheritance

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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. A disclaimer is the form that would be executed to refuse receipt of what was left to you. 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.

There are a number of requirements for a valid disclaimer. The 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. You may elect to refuse an inheritance to avoid tax consequences or to attempt to carry out the intentions of the decedent if they hadn’t drafted a will or you knew of other intentions. A disclaimer is irrevocable so be sure of your decision prior to executing the document.

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Refunding Bond and Release

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New Jersey requires that a refunding bond and release be executed by a beneficiary to receive what was lef to them in the estate. This document serves two key functions. First, the beneficiary acknowledges their responsibility to return what was received if additional debts of the estate are uncovered and there are no other means to pay the debts. Second, the beneficiary releases the executor/administrator from their estate administration role. The form should not be executed before nine (9) months from date of death.

To complete the form you will need the beneficiary’s name and address as well as total value of cash and property received by the beneficiary from the estate. The executor or administrator of the estate must also be identified on the form. The form should be signed before a witness and a notary public.  A guardian appointed by the court can sign on behalf of a minor or incapacitated person. The trustee can sign for any assets passing to a trust. The executor or administrator should file the original signed, witnessed and notarized Refunding Bond and Release to the Surrogate’s Court with required filing fees.  Include a self-addressed, stamped envelope if you would like to receive a filed coy of the Refunding Bond and Release for your records.

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Notice of Estate Administration

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If you are the executor or administrator of an estate, one of the first things you will need to do is provide notice that the estate has been opened to all individuals who stand to inherit from the decedent. This list may include individuals listed in the will as well as individuals who would inherit if the decedent died without a will. Pennsylvania Orphans Court Rule 10.5 requires that a certification be filed with the court confirming the required notice was given.  The certification requires you to list the names and addresses for all persons receiving notice of the estate.

New Jersey requires similar notice. Rule 4:80-6 requires the executor or administrator of an estate to mail Notice of Probate to all beneficiaries and the next-of-kin of the decedent within 60 days of the probate of the will. Proof of mailing must then be filed with the Surrogates office. If you do not have an address, notice of probate can be published. Sanctions can be imposed for failure to timely provide the required notice. Consult with an experienced estate attorney to make sure you complete the necessary notice requirements when serving as executor or administrator.

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