What assets comprise the probate estate?
What is the difference between testacy and intestacy?
How is a testate estate opened?
How is an intestate estate opened?
What are the responsibilities of an executor/administrator?
What are the steps in handling an estate?
How long does the probate process last?
What are the fees/costs of probate?
What assets are included in the taxable estate?
What deductions are allowable?
What are the current tax rates?
When is the inheritance tax return due?
What assets are included in the Federal taxable estate?
Under what circumstances does a Federal Estate tax return have to be
filed?
When is the Federal Estate tax return due?
Under what circumstances can one contest a will?
What are the court procedures associated with a will contest?
Probate
is the process by which the validity of a Will is determined and assets of a
decedent are administered.
What assets comprise the probate
estate?
A
decedent's probate estate consists of all assets held solely in his name at the
time of death, including but not limited to real estate, bank accounts,
investments and automobiles. The
probate estate does not include assets held jointly with another person or
assets that transfer to beneficiaries pursuant to a contractual provision (e.g.
life insurance, jointly held accounts, etc.) at the time of death.
What is the difference between a
testate estate and an intestate estate?
An estate
is deemed to be a testate estate if the decedent died with a valid Will. In a testate estate the decedent's assets
are transferred to those people or institutions set forth in the Will. If the decedent died without a valid Will
his estate would be deemed to be an intestate estate. In an intestate estate, the decedent's assets would be
transferred according to Pennsylvania statutory law. Under Pennsylvania law a decedent's assets generally pass to the
surviving spouse first, then to children, then to parents, then to
grandparents, then to siblings, then to aunts/uncles and so on.
How is a testate estate opened?
A testate
estate is opened in the Office of the Register of Wills of the county in which
the decedent was residing at the time of death. The Executor (the person named in the decedent's Will to be in
charge of handling the estate) must appear at the Register's Office with the
following documents: (1) the original
and two copies of the Will [if self-proving,
i.e. containing the notarized signatures of the decedent and two witnesses],
(2) a completed Petition for Grant of Letters Testamentary Administration
[blank Petitions are usually available at the Register's Office], (3) an
original death certificate, and (4) a check for the filing fee. The Executor will be given an oath in which
he swears to act according to the laws of the Commonwealth of Pennsylvania. If the Will is not self-proving the
witnesses to the decedent's signature will also be required to appear at the
Register's Office to verify the decedent’s signature on the Will.
How is an intestate estate opened?
An
intestate estate is opened in the Office of the Register of Wills of the county
in which the decedent was residing at the time of death. Unlike with a testate estate in which it is
clear who will be in charge of handling the estate, in an intestate estate a
number of individuals could possibly serve in the capacity of
Administrator. The Administrator must
at least 18 under Pennsylvania law.
Pennsylvania law provides that the decedent's spouse has first option to
serve, followed by the decedent's children.
If there is more than one person with equal standing to serve, they can
all serve jointly, a combination of them can serve, or just one can serve. In order to not serve when one is entitled
to one needs to file a Renunciation form with the Register of Wills. The Administrator must appear at the
Register' s office with the following documents: (1) a completed Petition for
Grant of Letters of Administration [blank Petitions are usually available at
the Register's Office], (2) an original death certificate, (3) Renunciation
forms, if required, and (4) a check for the filing fees. The Administrator will be given an oath in
which he swears to act according to the laws of the Commonwealth of
Pennsylvania
What are the responsibilities of
an executor/administrator?
The main
responsibilities of the executor/administrator are the managing of the estate
assets and the payment of the estate debts.
Additionally, the executor/administrator must prepare and file all
required documents, notices, tax returns and accounts with the proper
government offices. The
executor/administrator has the authority to sell estate assets, invest estate
funds, open bank accounts and to select an attorney to assist him in the
handling of the estate. The
executor/administrator can charge the estate a reasonable fee for the time and
effort expended on the estate.
What are the steps in handling an
estate?
After the
estate has been opened, the executor/administrator must provide notice to all
potential beneficiaries of the estate and file proof of that notice to the
Register of Wills office. The
executor/administrator must next file legal advertising for the purpose of
putting any creditors on notice of the estate.
The executor/administrator must file an Inventory of the estate assets
with the Register's office. The
Inventory is usually filed at the same time as the Pennsylvania Inheritance tax
return. Following approval of the tax
return the estate is closed through either the filing of a Family Settlement
Agreement or through the filing of a First and Final Accounting. A Family Settlement Agreement is an informal
summarization of the Receipts and Disbursements of the estate as well as a
breakdown of the distribution of the balance of the estate. All heirs must sign the document accepting
its terms. The First and Final
Accounting is the first step in a formal settlement of an estate. The First and Final Account is filed with
the Register's office and a copy is sent to each heir. The Orphans Court schedules the estate for an
Audit hearing at which time the Accounting is formally reviewed by an Orphans
Court Judge. The executor/administrator
also presents the Judge with a Petition for Distribution of the Estate
Assets. If there are no objections, the
Judge usually orders distribution as set forth in the Petition. If an heir or a creditor objects to the
Petition a hearing is held to determine what changes, if any, should be made to
the proposed distribution scheme.
How long does the probate process
last?
The
probate process usually last about a year.
Most estates stay open a year as creditors are prohibited from raising claims
after one year from the legal advertising of the estate.
What are the fees/costs of probate?
The fees
and costs of probate vary from county to county. All counties charge a fee for opening the estate, filing the
Inventory and closing the estate. Some
counties have the executor/administrator pay the advertising expense as part of
the fees to open the estate. Usually,
the fees will be in the range of $100 to $500.
A small
estate is an estate valued at less than $25,000. A small estate does not require the full probate process for the
distribution of the estate assets. Any
interested party can file a Petition to Settle a Small Estate with the Orphans
Court. The Petition must state: (1) the decedent's name and date of death, (2)
the rightful heirs of the estate, (3) the value of the estate assets, and (4)
proof of payment and acceptance of the Pennsylvania Inheritance tax.
An
ancillary estate is opened when the decedent resided out of state, but still
had assets within Pennsylvania.
What assets are included in the
taxable estate?
The decedent's
taxable estate includes all assets owned by him at the time of death, including
but not limited to real estate, cars, boats, investments, stocks, bonds, IRA's,
annuities, bank accounts, businesses and cash.
Assets that decedent held jointly with others are taxed based upon the
share of ownership of the decedent.
Assets that the decedent transferred to others within one year of death
are still taxable if they exceeded $3,000.
Life Insurance proceeds are not included in the taxable estate for
Pennsylvania inheritance tax purposes.
What deductions are allowable?
The
deductions allowed on the Pennsylvania Inheritance Tax Return fall into two
primary categories: (1) Expenses, and (2) Debts. Expenses include funeral and burial costs, attorney fees, probate
fees, advertising costs and the executor/administrator commission. Debts include all amounts owed by the
Decedent including utility bills, mortgages, credit card bills and personal
loans. These expenses and debts are
used to reduce the dollar size of the estate and thereby reduce the amount of
tax payable.
What are the current tax rates?
The
different tax rates that are applicable to the Pennsylvania Inheritance Tax
return are dependent upon the relationship of the beneficiary and the
decedent. There is a 0% percent tax
rate for any transfers to a surviving spouse.
Children or parents of the decedent pay at a 4.5% rate. The sibling rate is 12%. All other persons receiving assets are taxed
at a 15% rate. Assets left to charities
are also non-taxable.
When is the inheritance tax return
due?
The
Pennsylvania Inheritance Tax return is due nine (9) months from the date of
death. If the return is not filed
timely, interest and penalties begin to accrue. If the return is filed within ninety (90) days of the date of
death, the estate is granted a 5% discount on the tax due.
What assets are included in the
Federal taxable estate?
All of
the assets taxable under the Pennsylvania Inheritance Tax return are also
taxable under the Federal Estate tax return.
Life insurance proceeds (not taxable under the PA return) are part of
the Federal taxable estate. Jointly
owned property may also be taxable at its full amount if it cannot be shown
that the property was transferred to the co-owner for adequate consideration.
Under what circumstances does a
Federal Estate tax return have to be filed?
The
Federal Estate tax return only needs to be filed if the taxable estate exceeds
$675,000. Under the current tax plan
there is a gradual phase out of the Federal Estate tax over the next decade.
When is the Federal Estate tax return
due?
The
Federal Estate tax return is due within one year of the date of death.
Under what circumstances can one
contest a will?
A person
may contests a Will if he believes that the Testator (the person who drafted
the Will) lacked the capacity to understand the document at the time of signing
or was under the undue influence of another person. A Will may also be contested if it is alleged that the Will
itself is a counterfeit document.
What are the court procedures
associated with a will contest?
A will
contest procedure begins with the filing of a Complaint with the Clerk of
Orphans Court. A hearing is held in
front of an Orphans Court Judge who determines the validity of the Will.