Probate is the legal process of administering a deceased person’s estate. A decedent’s probate estate consists of assets owned by the decedent in his or her name alone that do not have a beneficiary or transfer-on-death designation. Attorney’s fees associated with administering a decedent’s estate are an expense of estate administration and are thus authorized by Pennsylvania law to be paid from the assets of the estate. As such, Personal Representatives (i.e. Executors and Administrators) engage our firm to assist them with probate shortly after a person’s death. Frequently, we are asked what to expect throughout the estate administration process. The following is a brief overview of the probate process in Pennsylvania.
- Filing for Letters of Administration or Letters Testamentary to have a Personal Representative appointed: If the decedent dies with a Will, the person who is named Executor under the Will files a Petition for Letters Testamentary 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 for Letters of Administration with the Register of Wills 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. In most cases, being recognized as the Personal Representative of an Estate is a straight-forward, albeit paperwork-intensive process.
- Complying with Notice Requirements to the Beneficiaries and Interested Parties of the Estate: The Personal Representative is legally required to notify beneficiaries and interested parties of the estate administration while it is in process. Pennsylvania Orphans’ Court Rule 10.5 outlines who must receive a notice and when they must be notified. For example, the decedent’s spouse and children, whether or not they are named in, or have any interest under the Will must be notified. A certification listing the parties that received the required Notice also must be filed with the Register of Wills.
- Advertising the Estate: 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 or his attorney and that all persons indebted to the decedent make payment to the Personal Representative.
- Marshaling 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.
- Inventory of the Assets of the Decedent’s Estate: 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.
- Preparing and Filing the Appropriate Death and Income Tax Returns:
Pennsylvania Inheritance Tax Return
The Pennsylvania Inheritance Tax Return (REV-1500) is due within nine (9) months of the date of death of the decedent. This return reports the assets and debts of the decedent, as well as the expenses of the administration of the estate. Depending on the relationship of the decedent to the beneficiary, inheritance tax may be due to the Commonwealth of Pennsylvania. Any inheritance tax due must be paid within nine (9) months of the date of death. There is a discount available for the early payment of the tax – payment made within three (3) months of the date of death.
Federal Estate Tax Return
If the value of the estate exceeds the federal estate tax exemption amount, the estate must also file a Federal Estate Tax Return (IRS Form 706) and pay the associated tax, if any.
Personal and Fiduciary Income Tax Returns
The Personal Representative is responsible for ensuring the filing of the decedent’s Final Income Tax Returns (IRS Form 1040 and PA-40) and if applicable, the Estate’s Fiduciary Income Tax Returns (IRS Form 1041 and PA-4).
- Paying 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 Personal Representative 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.
- Settling the Decedent’s Estate: A Family Settlement Agreement is the term used for an agreement entered into by all of the heirs as to how an estate should be distributed. The estate may be settled informally by means of a Family Settlement Agreement between the personal representative and the beneficiaries of the estate. If the estate cannot be settled informally, a formal court proceeding, which includes filing of an account, proposed schedule of distribution and a Petition for Adjudication, may be necessary to settle the estate. A Family Settlement Agreement does not cut off the rights of third parties, hence the reason a Personal Representative should obtain legal advice as to how to settle the estate in the manner that best protects them from personal liability.
- Distributing the Assets of the Estate to the Beneficiaries of the Estate: After a Family Settlement Agreement is signed by the beneficiaries or an account is approved by Orphans’ Court, the estate may be distributed to the beneficiaries of the Will or the intestate heirs of the estate.
Given the complexities and risks associated with administering a decedent’s estate as required by law, it is best to consult with an experienced estate administration attorney to counsel you through the entire process.
ABOUT JEANNA LAM
Ms. Lam utilizes sophisticated estate planning techniques to provide comprehensive estate planning services that address each client’s unique planning goals and objectives, including transfer tax, wealth preservation and asset protection concerns. On the trust and estate administration side, Ms. Lam works closely with both fiduciaries and beneficiaries to evaluate and address the multitude of legal, financial and tax issues that may arise during the course of the administration of the trust or estate.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing full-service law firms in the United States. With 14 offices in seven states, and the District of Columbia, and growing by 50% in two years through expansions in New York City and Charlotte, North Carolina, Offit Kurman is well-positioned to meet the legal needs of dynamic businesses and the individuals who own and operate them. For over 30 years, we’ve represented privately held companies and families of wealth throughout their business life cycles.
Whatever and wherever your industry, Offit Kurman is the better way to protect your business, preserve your family’s wealth, and resolve your most challenging legal conflicts. At Offit Kurman, we distinguish ourselves by the quality and breadth of our legal services—as well as our unique operational structure, which encourages a culture of collaboration and entrepreneurialism. The same approach that makes our firm attractive to legal practitioners also gives clients access to experienced counsel in every area of the law.
Find out why Offit Kurman is The Better Way to protect your business, your assets and your family by connecting via our Blog, Facebook, Twitter, Instagram, YouTube, and LinkedIn pages. You can also sign up to receive LawMatters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
DELAWARE | MARYLAND | NEW JERSEY | NEW YORK | NORTH CAROLINA | PENNSYLVANIA | VIRGINIA | WASHINGTON, DC