Probate in Pennsylvania - Answer to frequently asked questions
FREQUENTLY ASKED QUESTIONS ABOUT
DECEDENTS’ ESTATES IN PENNSYLVANIA
What is a DECEDENT’S ESTATE? A DECEDENT’S ESTATE is essentially all of the property a person owned at the time of his or her death. Property might include real estate, cash, bank accounts, stocks, bonds, mutual funds, furniture, collections, patents, copyrights, and even the right to sue for injuries or breach of contract.
What happens to a person’s property when they die? A person’s property can be divided into to classes 1) Probate property which is property that passes by will or if no will by intestate succession and 2) Non-probate property which is property that passes regardless of a will either by operation of law such as joint property with rights of survivorship or Tenants by the entireties or property that passes by designation of beneficiaries such as IRA’s 401 (k)’s and life insurance. As to probate property, clear title to property does not pass to beneficiaries under a will or to the heirs of the decedent unless and until the estate is administered by a personal representative.
What is a PERSONAL REPRESENTATIVE? - A PERSONAL REPRESENTATIVE is the person who administers the estate of a decedent. If the decedent had a will, the personal representative (named in the will) is called an EXECUTOR (male) or an EXECUTRIX (female). If the decedent had no will, the personal representative is called an ADMINISTRATOR (male) or ADMINISTRATRIX (female). State law determines who is eligible to be an administrator(rix).
How does one become a PERSONAL REPRESENTATIVE? - A person becomes a personal representative by filing a PETITION FOR GRANT OF LETTERS with the Register of Wills. Upon filing of the petition, a filing fee is paid and the personal representative takes an oath of office. The personal representative undertakes a duty to the Commonwealth of Pennsylvania, the Federal government, all creditors of the decedent (persons to whom the decedent owed money) and the beneficiaries under the will or the heirs of the decedent to deal fairly and honestly with them. The Register of Wills grants LETTERS TESTAMENTARY to an executor under a will and LETTERS OF ADMINISTRATION to an administrator.
What is a RENUNCIATION? - A RENUNCIATION is a written document whereby a person entitled to be a personal representative renounces that right in favor of another person. For example, if a person named as executor in a will does not want to administer the estate, he or she may renounce his or her right in favor of the person name as the alternate executor. Another example would be where a person dies without a will leaving five adult children as the only heirs. Each of the children might agree that the oldest should administer the estate. The younger four would sign renunciations in favor of the oldest.
What is an ESTATE INFORMATION SHEET? - An ESTATE INFORMATION SHEET is a form required to be filed with the Petition for Grant of Letters.
What is a NOTICE OF BENEFICIAL INTEREST - A NOTICE OF BENEFICIAL INTEREST is a form required by Rules of Court to be sent to all persons who would have an interest in an estate if there were no will (even if there is a will). The notice is sent by the personal representative or the Attorney for the personal representative, who must then file
A certification that the notice was sent with the Register of Wills. The notice informs of the death of the decedent, the date of death, the name and address of the personal representative and other information that might be helpful in protecting rights, if any, in decedent’s property.
What is an ESTATE NOTICE or ESTATE ADVERTISEMENT? - An ESTATE NOTICE or ESTATE ADVERTISEMENT is a notice which must contain certain information about the estate and personal representative which is published in a newspaper of general circulation and in the official legal publication of the county where the decedent last resided. It is usually advisable for a personal representative to publish the advertisement in order to cut off claims against the estate and protect the personal representative.
What is INHERITANCE TAX? - INHERITANCE TAX is a tax imposed by the Commonwealth of Pennsylvania upon the transfer of property upon or as a result of death. It is based upon a percentage of the net value of the property of a decedent transferred subject to the tax. Some transfers are not subject to the tax. Examples are charitable bequests and most life insurance benefits. The tax also applies to certain transfers made during the lifetime of the decedent. The net value of the property subject to the tax is determined by totaling the value on the date of death of all property transferred subject to the tax, and subtracting funeral expenses, administration expenses and debts of the decedent. This figure is taxed at 0% for Class A Beneficiaries (Spouses and parents of decedents who died under the age of 21) ; 4.5% for Class B Beneficiaries (Grandparents, parents children, and spouses or surviving spouses of children who have not remarried and lineal descendants); 12 % for siblings and 15 % for all others
What is the DISCOUNT DATE for inheritance taxes? - The DISCOUNT DATE for inheritance taxes is the date three months after the date of death. The amount of actual inheritance tax paid by that date will receive a 5% discount. Thus, if a personal representative pays $10,000.00 of the tax by that date, he will receive a credit as if he had paid $10,500.00 (a $500 savings). If there is money available to pay the tax, it is advisable to estimate as closely as possible the amount of tax due and pay as close to 5% less than the actual tax as possible without paying more. NOTE: The inheritance tax return and payment of the tax is due nine months from the date of death.
What is ESTATE TAX? - The term ESTATE TAX usually refers to FEDERAL ESTATE TAX, which is imposed by the Federal Government upon the net value of the decedent’s estate. Most estates are not subject to Federal estate taxes unless the total value is in excess of $5,250,000 or up to $10,500,000 for married couples. (NOTE: For Federal Estate Tax purposes, the Estate includes most life insurance proceeds, unlike inheritance tax). (There is such a thing as Pennsylvania Estate Tax which applies only to a very small percentage of estates.)
What is a STATUS REPORT? - A personal representative is required by Rules of Court to file a report with the Register of Wills within nine (9) months of the date of death and if administration is not complete, annually thereafter until the administration is complete.
What is an ACCOUNT or ACCOUNTING? - When a personal representative prepares to finish the administration and distribute the assets of the estate, he or she must prepare an account of his or her administration. The Account summarizes the assets received and administered, the value of those assets, whether or not they were sold, the debts, taxes and expenses paid, the amount available for distribution to heirs and beneficiaries, and the proposed distribution. If all persons interested in the estate proceeds agree with the proposed distribution, the estate can be settled by written agreement. Otherwise the account must be presented to and approved by the Court.
What is a FAMILY SETTLEMENT AGREEMENT? - A FAMILY SETTLEMENT AGREEMENT is the name I give to an agreement entered into between family members agreeing with the account of the personal representative and the proposed distribution without the necessity or expense of formal presentation of the account to the Court for approval.
When a will names a lawyer to represent the estate or personal representative, is the personal representative bound by that selection? - No. While wills frequently designate a lawyer to assist the personal representative, this merely states a preference of the decedent. Unless bound by a contract that the decedent entered into during lifetime, the personal representative is free to choose a lawyer he or she is comfortable with.