After the death of a loved one, often family members are barely over their mourning when the letters and notice from creditors and hospitals start pouring in. Families are often left with the question of what to do with the deceased person’s assets and personal property. Often the deceased person may have had a home and a mortgage that needs to be addressed. Sometimes there is a Last Will and Testament or a “Will” left behind that directs how the property will be distributed. Other times there is no Will. Who receives the property then? Who is responsible for paying off the bills? All of these matters are addressed by the probate process in the state in which the deceased person lived.
What is Probate?
Probate is the legal process of administering a deceased person’s estate. A decedent’s probate estate consists of assets left owned by the decedent in his or her name alone. Before any beneficiary or heir of a deceased person can receive property that belonged to the deceased person, the estate must be properly administered and all debts of the estate must be cleared. Below is a brief overview of the steps that are involved in this process:
Appoint a Personal Representative by Filing for Letters of Administration or Letters Testamentary:
If the decedent dies with a Will, the person who is named Executor under the Will files a Petition with the local Register of Wills to become the appointed Executor of the Estate. If the decedent dies “intestate,” meaning without a Will, the decedent’s next of kin files a Petition with the local Court to become the appointed Administrator of the Estate.
In the case of intestacy, the decedent’s other family members may need to sign a document called a “Renunciation,” in order to renounce their right to serve as Administrator. If the process encounters complications, a hearing with the Court may be necessary to appoint a Personal Representative.
Notify the Beneficiaries and Interested Parties of the Estate:
In certain states, the Executor or Administrator is legally required to notify beneficiaries and interested parties of the estate administration while it is in process. For example, in Pennsylvania the law states that certain individuals, such as the decedent's spouse and children, must be notified whether or not they are named in, or have any interest under the Will.
In New Jersey, a Notice of Probate of Will must be sent out to all beneficiaries under the Will and to the spouse, heirs and next-of-kin of the decedent.
Advertise the Estate and Notify Known Creditors:
In some states, the Personal Representative is also legally required to advertise the estate by requesting that all persons having claims against the estate make their claims known to the Personal Representative. The Personal Representative may also be legally required to notify creditors that are known in writing and must make reasonable efforts to contact them to resolve outstanding debts.
Marshal the Decedent’s Assets:
The Personal Representative has the legal authority to secure and collect the decedent’s assets as well as ascertain the extent of the decedent’s debts. This means that the Personal Representative must contact all banks where the deceased person had an account, notify retirement plan administrators and life insurance policies, secure physical assets such as personal property, vehicles, boats etc. and ensure any real property such as a house is secure and kept in safe condition.
Inventory of the Assets of the Decedent’s Estate:
In certain states, like Pennsylvania for example, this document must be filed with the Register of Wills within nine (9) months from the date of death of the decedent. The inventory is a statement of the probate property and the value of such property on the date of the decedent’s death.
Prepare and File the Appropriate Death and Income Tax Returns:
As the old saying goes, nothing is certain except death and taxes. After a person passes away, the Personal Representative must prepare and file the appropriate death taxes. The returns must be filed even if no taxes are due.
In Pennsylvania, the inheritance tax return must be filed within nine months of the date of death. The tax rate in Pennsylvania depends on the relationship of the beneficiary to the deceased person. If the deceased person’s estate is worth more than $5.43 million dollars (for a Decedent dying in 2015), then the Federal Estate tax returns have to be filed as well. In addition, the deceased person’s final personal state and federal income tax returns have to be filed.
Pay the Debts of the Estate:
Once the Personal Representative has an accurate accounting of the decedent’s assets and debts, and provided the estate is not insolvent, he or she may pay the debts of the estate. If payments are made without knowing all assets and debts, the Administrator or Executor puts him or herself at risk for being personally liable to the interested parties of the estate. Furthermore, personal liability also exists if the estate is insolvent and the Personal Representative made payments contrary to what is required by law.
Settle the Decedent’s Estate:
A Family Estate Settlement Agreement is the term used for an agreement reached by all of the heirs as to how an estate should be distributed. The estate may be settled informally by means of a Family Estate Settlement Agreement between the personal representative and the beneficiaries of the estate.
If the estate cannot be settled informally, then the interested parties may have to file a formal court proceeding, which, in Pennsylvania, includes filing of an account, proposed schedule of distribution and a Petition for Adjudication.
A Family Settlement Agreement, while easier and more cost effective does not apply to the rights of third parties, such as creditors, and so the Personal Representative must ensure any third parties’ claims against the estate are resolved.
Distribute the Assets of the Estate to the Beneficiaries of the Estate:
After a Family Estate Settlement Agreement is signed by the beneficiaries or an account is approved by the Court, any remaining assets of the estate are distributed to the beneficiaries of the Will or the intestate heirs of the estate.
For more information on legal issues after the death of a loved one, please feel free to consult these educational articles on Funerals360:
About the Authors:
Kathleen A. Maloles is the founder and principal of Maloles Law, LLC a boutique law firm specializing in estate planning and administration and trusts and estates litigation. Kathleen focuses her practice on the areas of estate planning and administration.
Buneka J. Islam is an attorney at Maloles Law. Buneka focuses her practice on the areas of estate planning and fiduciary trusts and estates litigation.
For more information or a free initial consultation on the process of administering a decedent’s estate in Pennsylvania and New Jersey, please contact the experienced Estate Attorneys at Maloles Law, LLC at 215-600-1362 (www.maloleslaw.com)
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