When a loved one passes away, the process of estate administration begins as family or friends begin work to wind up the deceased individual’s affairs. For many, this is a time of deep reflection and contemplation. For those tasked with helping to wrap up the deceased’s financial affairs, it is a time to lean on professionals for guidance through the administration process.
Being named an executor or trustee is an honor for some because appointment to the position signifies the deceased’s trust in the selected individual. Accepting this role also comes with responsibility. Executors and trustees are called “fiduciaries” because they have an obligation to act in the best interest of the beneficiaries the deceased has chosen to receive an inheritance. Being a fiduciary carries with it a promise to faithfully carry out the administration by being loyal and acting in the best interest of the beneficiaries throughout the entire process. In many instances, it is appropriate for a fiduciary to seek professional legal guidance by hiring an attorney to assist in this process to ensure these duties are carried out properly.
It is important to remember that an estate administration that requires assets to be transferred from the deceased’s name alone to the beneficiaries is a legal proceeding that requires a particular process to be followed and filings to be made with the court. This process, called probate, requires the executor to petition the court to receive paperwork necessary to carry out the administration and transfer assets into the name of the estate, notify certain potential beneficiaries and necessary parties of the administration, satisfy appropriate debts and tax liabilities, make distributions, and finish the administration by preparing a formal accounting or family settlement agreement.
Trust administration, while often not a public proceeding like probate, still requires the trustee to carry out some formalities such as marshaling assets, providing notice to beneficiaries, paying the appropriate debts and taxes and ending the administration with a settlement agreement.
Even where a formal probate or trust administration is unnecessary, preparation and filing of the Pennsylvania Inheritance Tax Return may be required. This tax on the right to inherit requires that a return be filed and payment be made within nine (9) months of the date of death. Assets are subject to tax regardless of their status as probate or non-probate assets. With the exception of life insurance proceeds, most assets are subject to this tax.
Making an estimated payment of the inheritance tax within ninety (90) days of the date of the decedent’s death results in a discount and so it is wise to determine if an early payment may be made. Deductions may also be used on the return to alleviate some of the inheritance tax burden. While the Pennsylvania Inheritance Tax rates are not back-breakers (0% to spouses, 4.5% to children and grandchildren, 12% to siblings and 15% to anyone else), it is still important to take advantage of any available deductions, make a prepayment determination, and analyze the entire tax picture.
As you can see, there are a lot of considerations to be made and steps to be taken when a loved one passes away. It is at this difficult time that families should lean on professionals for guidance in winding up their loved one’s affairs. At Marshall, Parker & Weber we have been assisting families through the estate administration process and in finding peace of mind for over thirty-five (35) years. We would be honored to provide you with a one-hour consultation with one of our attorneys to discuss your estate administration case.