The lawyers at Maloles Law, LLC handle the administration of estates from start to finish, including “probate” or the process of opening the estate with the appropriate authority, complying with state law filing and notice requirements, negotiating with creditors to settle debts of the decedent, preparing and filing the necessary estate and inheritance tax returns, preparing and filing fiduciary income tax returns if required, making distributions of estate assets to beneficiaries and settling the estate.
Our attorneys practice in the courts that handle Wills, Trusts, Estate and Probate matters in both Pennsylvania and New Jersey. They have appeared before the Orphans’ Court in Philadelphia County, Montgomery County and Bucks County, Pennsylvania and the Superior Court in several counties in New Jersey, including Camden County, Atlantic County and Cape May County.
[tlt_header important=”3″]Estate and Trust Administration[/tlt_header]
[tlt_accordion_item header=”Estate Plan FAQs”]
What is a will?
A will is a document that directs how your assets and personal belongings are to be disposed of after your death. A person who makes a will is called the testator. A will is a formal document that must meet certain statutory requirements in order to be valid. In Pennsylvania, a will must be in writing and signed at the end thereof by the testator. A testator must be above the age of 18, and must have the legal capacity to make a will at the time the will is made.
What are the requirements for witnesses to a will?
Before a will can be admitted into probate, the testator’s signature must be subscribed to by two competent witnesses, who are familiar with the testator’s handwriting. A will that is signed by two witnesses and notarized during the execution is a self-proving will that does not require any additional steps to validate. If the will is witnessed, but not notarized, then the witnesses may be called to testify as to the testator’s signature before it is admitted to probate. Because of the difficulties that lie in locating the original witnesses, it is always best practice to execute a self-proving will in the presence of a notary.
In Pennsylvania, a will that is witnessed by someone who is a beneficiary under the will is not invalid, however, it is best practice not to have a person with an interest in the will be a witness. Whether a witness is a beneficiary under the will affects the credibility of the will, rather than the validity. For more information on will challenges, click here.
What happens if I die without a will?
When a person dies without a will, that person is said to have died intestate. Each state has its own laws regarding what happens to a person’s property if they die intestate. In Pennsylvania, the decedent’s spouse receives the first $30,000 of the estate, followed by half of the remaining assets. The rest of the assets are divided amongst the decedent’s children, or if there are no surviving children, amongst the decedent’s parents.
In rare cases, the state may inherit a decedent’s estate. In Pennsylvania, this may happen if a person dies without any surviving relatives, including grandparents, uncles and aunt or cousins up to first cousins. A person may avoid this situation by having a will that leaves the person’s estate to a beneficiary of the testator’s choosing, a charity or in a trust to benefit a beneficiary of the testator’s choosing.
What happens if I change my mind after I make a will?
If you change your mind about your will, you may amend your existing will with a codicil, or you can revoke your earlier will and execute a new one. Certain events, such as marriage, divorce or birth of a child can automatically affect your will, so it is important that you update your will if any these events occur.
It is generally a good practice to review your will from time to time, to ensure it is up to date. Certain events, such sale or gift of a specific asset or change in titling of a property may change how the property is transferred upon death. Therefore, you should review your will after any major change in ownership of assets. You may also want to make changes to your named beneficiaries, executors, trustees and guardians in the event one of them is no longer available or willing to serve. Finally, it is always a good idea to have your estate plans reviewed whenever you relocate to another state to ensure it is in compliance with the new state laws, and minimizes inheritance tax and estate tax liability.
Who takes care of my property when I die?
A testator may appoint an executor in their will. An executor is responsible for all the tasks associated with administering a person’s estate after they pass away. For more information on estate administration,click here. A testator may choose to appoint a successor executor in case the first person appointed is unable or unwilling perform the tasks. If the person dies intestate or the appointed executor and successor executor are unwilling or unable to serve, then the state laws provide a list of persons who may serve and the order in which they may serve. A person who is appointed to administer an estate in the absence of a will is an administrator.
What are the rights and the obligations of the executor or administrator?
Executor’s job is to carry out the wishes of the decedent. The executor offers the will for probate, collects all the assets of the estates, and pays all outstanding debt, and distributes any remaining assets to the beneficiaries. This is in addition to any other specific wishes of the decedent left in the will. The executor can receive reasonable compensation for his or her services. The executor has an obligation to act in the best interest of the beneficiaries. Further, the executor can be personally liable to the beneficiaries for mismanagement of estate funds and causing loss to the beneficiaries. Because of the significant obligations of the executor, the executor named in the will has the right to refuse to serve in that position. For information on what to do if an executor has failed to act in the best interest of the beneficiaries, click here.
Can I use my will to reduce my taxes?
This is a complicated issue that will vary from person to person depending on your individual situation. You should seek the advice of a competent attorney on this matter. At Maloles Law, we are happy to assist you with tax planning.
[tlt_accordion_item header=”Ancillary Probate”]
If a decedent dies owning real property in a state other than his or her state of domicile (i.e. state of residence), there are special rules that govern the probate process for disposing of such out-of-state real property. For instance, if the decedent died a resident of the State of Florida, but owned real property in the states of Pennsylvania and New Jersey, the decedent would have a non-resident estate in these states.
Ancillary probate is the process of whereby an out-of-state Personal Representative institutes a probate proceeding in the state or states in which the decedent owned real property
In Pennsylvania and New Jersey, when a Personal Representative of a non-resident decedent wishes to exercise a power over real property within those states, he or she will have to qualify and institute ancillary probate proceedings as a foreign fiduciary. Once qualified, the Surrogate’s Court in New Jersey or the Register of Wills in Pennsylvania issues “Ancillary Letters Testamentary” or “Ancillary Letters of Administration.” The ancillary Personal Representative will need to ensure certain state-specific requirements are met, such as satisfying creditors located in Pennsylvania or New Jersey, filing an Inventory (in Pennsylvania), and filing and paying the appropriate death taxes due to the Commonwealth of Pennsylvania or the State of New Jersey.
The experienced attorneys at Maloles Law have counseled their clients through numerous ancillary probate proceedings and often work with out-of-state attorneys representing Personal Representatives in other states to assist with non-resident decedent estates in Pennsylvania and New Jersey. Oftentimes, the Estate lawyers at Maloles Law work hand-in-hand in counseling the client through the entire probate process for matters concerning ancillary probate either in Pennsylvania or New Jersey.
[tlt_accordion_item header=”Opening the Estate”]
The attorneys at Maloles Law assist clients with opening estates in all counties located in Pennsylvania and New Jersey.
In PA, the executor named under the will files a Petition for Letters Testamentary or the administrator (in cases where there is no will) files a Petition for Letters of Administration to open the estate with the Register of Wills. In Pennsylvania, 20 Pa. C. S. § 3155 lists who has priority to be appointed administrator of an estate:
- The surviving spouse.
- Those entitled under the intestate law as the Register, in his discretion, shall judge will best administer the estate, giving preference, however, according to the sizes of the shares of those in this class.
- The principal creditors of the decedent at the time of his death.
- Other fit persons.
At times, a hearing may be deemed necessary to have a personal representative appointed for a decedent’s estate in PA.
In New Jersey, Wills may be filed in one of two ways. In an Ex Parte proceeding (the most common method), the executor appears at the Surrogate’s Court without notice to anyone. Solemn form probate occurs when all parties beneficially interested in the probate of a will are given legal notice. Upon filing the appropriate complaint with a New Jersey Supreme Court where the resident was domiciled, a date is fixed for a hearing to receive testimony and other evidence with respect to whether the will should be admitted to probate. For an intestate NJ estate, the surviving spouse has priority in serving as administrator. If there is no surviving spouse, the next of kin in order of degree may apply, presenting renunciations from all competent adults who also have a right to serve whether their right is prior to or equal to the person who seeks to be appointed the administrator.
[tlt_accordion_item header=”Complying with state law notice and filing requirements”]
Once an estate is raised in Pennsylvania or New Jersey, there are certain notice and filing requirements that need to be made by the Executor or Administrator of a decedent’s estate. Such notices must be timely filed, or the Personal Representative risks claims from interested parties that they are not administering the estate as required by law which can result in removal as Personal Representative and/or a surcharge penalty. Usually, such surcharge penalties must be satisfied by the Personal Representative’s own funds or assets. The attorneys at Maloles Law assist our clients with preparing the requisite notices and counseling our clients as to when these notices must be filed.
Examples of some Notice and Filing Requirements in PA Probate are as follows:
Notice of Beneficial Interest
The Personal Representative or his or her counsel is required to send a written notice within three months, after the grant of Letters of Administration or Letters Testamentary to the following persons or entities pursuant to PA Orphans’ Court Rule 5.6:
- Every person, corporation, association, entity, or other party named in decedent’s Will as an outright beneficiary, whether individually or as a class member;
- The appointed guardian of the estate, or the parent or legal custodian of any beneficiary who is a minor child under the age of 18 years;
- The appointed guardian of the estate or, in the absence of such appointment, the institution or person with custody of any beneficiary who is an adjudicated incapacitated person;
- The Attorney General on behalf of any charitable beneficiary whose interest exceeds $25,000.00 or which will not be paid in full;
- The Attorney General on behalf of any governmental beneficiary or in default of other heirs of the estate;
- The trustee(s) of any trust which is a beneficiary; and
- The spouse, children or other intestate heirs of the decedent, as determined under Chapter 21 of the PA Probate Estates and Fiduciaries’ Code.
An inventory is required to be filed before an Executor or Administrator can file a formal account with the PA Orphans’ Court. The inventory includes assets which are held in the decedent’s name only, and must show the fair market value of each asset as of the date of the decedent’s death.
The inventory must be filed by the earlier of the date on which the Personal Representative files a formal account or the due date (including any extensions) for filing of the estate’s PA inheritance tax return.
Examples of some Notice and Filing Requirements in administering an NJ Estate are as follows:
Notice of Probate of Will
A Notice of Probate of Will must be sent out within 60 days of the Will’s probate. This Notice must be sent the last known address of all beneficiaries under the Will and to the spouse, heirs and next-of-kin of the decedent.
Proof of Mailing
A Proof of Mailing must be filed with the Surrogate’s Court within 10 days of the mailing. This document certifies to the Surrogate that the Personal Representative mailed the Notice of Probate of Will to the individuals or entities entitled to the Notice.
Unlike Pennsylvania, Executors or Administrators rarely file an inventory in New Jersey unless ordered to do so by the Court.
[tlt_accordion_item header=”Negotiating with creditors to settle debts of the decedent”]
Dealing with PA Estate Creditors
In Pennsylvania, whether a decedent died with or without a will, creditors with valid claims have priority over the beneficiaries with respect to estate assets. An executor or administrator must provide notice by mail or other means to known or reasonably ascertainable creditors. An executor or administrator is also required by law to advertise the grant of letters. A creditor then has one year from the date of first complete publication to bring a claim against the estate. This is a very important deadline that a personal representative should be aware of since it means that if notice was properly given, a creditor will be barred from being paid from the assets of the estate if it makes a claim after the one year from publication of the grant of letters.
A claim may come in the form of a bill or statement. Additionally, some creditors also file formal claims with the Court in the PA County where the estate is raised. Our PA estate attorneys assist clients with negotiating with creditors who timely file claims against a decedent’s estate to settle the decedent’s debts, and also advise clients in properly advertising the grant of letters as required by Pennsylvania law.
The executor or administrator must also ascertain whether the decedent received medical assistance within five years preceding death and must give notice to the Pennsylvania Department of Public Welfare within three months after grant of letters, requesting a statement of claim. Our PA estate attorneys assist clients with this process.
Dealing with NJ Estate Creditors
In New Jersey, there is no legal requirement to advertise the estate. Creditors are required by law to present their claims to the executor or administrator in writing and under oath within nine months from the decedent’s date of death. Within three months after the presentation of a claim to the personal representative, the personal representative must allow or dispute the claim, or allow in part and dispute in part, and give written notice to the creditor, his agent or attorney of the decision. Thereafter, within three months after receiving notice that a claim (or a part of it) has been disputed, the creditor must commence an action to recover on the claim, otherwise the Personal Representative will not be liable to the creditor with respect to any assets which he may have distributed or paid in satisfaction of any lawful claims before the commencement of the action. Given the burden the law places on creditors to preserve their claims against a New Jersey decedent’s estate, efficient administration of the estate and timely distributions could be helpful in protecting assets of the estate from claims of the decedent’s creditors. Our experienced NJ estate attorneys work hand in hand with clients to handle such creditor issues.
[tlt_accordion_item header=”Preparation of tax returns”]
Our estate attorneys assist clients with the preparation of state and federal tax returns that must be filed when administering a Pennsylvania or New Jersey Estate.
Pennsylvania Death Tax Returns
For PA Probate, a resident decedent may be required to file a REV-1500 Inheritance Tax Return with the PA Department of Revenue. A non-resident decedent may be required to file a REV 1737-A (Pennsylvania Inheritance Tax Return Non-Resident Decedent).
New Jersey Death Tax Returns
For NJ Probate, a decedent who dies a resident of New Jersey may be required to file one or more of the following forms to comply with the NJ Inheritance Tax Return filing requirements:
- IT L-8 – Affidavit and Self-Executing Waiver
- IT L-9 – Affidavit of Resident Decedent Requesting Real Property Tax Waiver
- IT-R – Inheritance Tax Return
- IT-Estate – NJ Estate Tax Return – This return is required to be filed if a New Jersey Resident decedent’s gross estate plus adjusted taxable gifts exceed $675,000.00.
New Jersey non-resident decedents may be required to file any of the following forms to the NJ Division of Taxation:
- IT L-9-NR – Non-Resident Decedent Requesting Real Property Tax Waiver
- IT-NR – Inheritance Tax Non-Resident Return
Federal Estate Tax Returns
Our estate attorneys also handle the preparation and filing of Federal Estate Tax Returns (IRS Form 706) for decedents’ estates subject to the Federal Estate Tax and for those estates where the executor or administrator wishes to preserve portability of the first spouse to die’s unused estate tax exemption.
Federal and State Fiduciary Income Tax Returns
Our experienced estate administration attorneys prepare and file Federal and State Fiduciary Income Tax Returns as follows:
- IRS Form 1041 – U.S. Income Tax Return for Estates and Trusts
- PA-41 – Pennsylvania Fiduciary Income Tax Return
- NJ-1041 – State of New Jersey Gross Income Tax Fiduciary Return
[tlt_accordion_item header=”State Death Tax Returns”]
Pennsylvania Death Tax Returns
A Pennsylvania Inheritance Tax return must be filed for every decedent who has property which is or may be subject to tax, an attorney can assist with the filing process.
A PA Inheritance Tax return is due nine (9) months from the decedent’s death. Failure to file may subject the estate to a penalty of 25% of the tax ultimately found to be due or $1,000 whichever is less.
In Pennsylvania, you or an attorney must file a return if you are:
(a) The personal representative of the decedent’s Pennsylvania estate. The return must disclose property of the decedent administered by the personal representative and additional property, which is or may be subject to Pennsylvania Inheritance Tax, of which the personal representative has or acquires knowledge.
(b) The transferee of property, if no personal representative is appointed or if the personal representative does not file a return, or if the personal representative files a return but does not include the subject property. A “transferee” means any person to whom a transfer is made and includes legatees, devisees, heirs, next of kin, grantees, beneficiaries, vendees, assignees, donees and surviving joint tenants. The return must disclose any property or any interest therein or income therefrom in possession or enjoyment, present or future, in trust or otherwise which passes ownership to the transferee. A separate transferee return is not required for property included in a personal representative’s return. The inclusion of property in the return does not constitute an admission that its transfer is taxable.
New Jersey Death Tax Returns
NJ Inheritance Tax Return
Currently, in New Jersey, the law imposes a graduated Transfer Inheritance Tax ranging from 11% to 16% on the transfer of real and personal property with a value of $500.00 or more to certain beneficiaries. The tax rate depends upon the relationship of the beneficiary to the decedent, which an attorney can specify.
A Transfer Inheritance Tax Return must be filed with assistance from an estate attorney and the tax paid on the transfer of real and personal property within eight months after the death of either:
(1) A RESIDENT decedent for the transfer of real or tangible personal property located in New Jersey or intangible personal property wherever situated, or
(2) A NONRESIDENT decedent for the transfer of real or tangible personal property located in New Jersey. No tax is imposed on nonresident decedents for real property located outside of New Jersey and intangible personal property wherever situated.
Property passing to a decedent’s surviving spouse, parents, grandparents, children, stepchildren or grandchildren is entirely exempt from the tax. If a decedent’s death occurs on or after February 19, 2007, property passing to a decedent’s surviving civil union partner is entirely exempt from the tax. If a decedent’s death occurs on or after July 10, 2004, property passing to a decedent’s surviving domestic partner is entirely exempt from the tax.
[tlt_accordion_item header=”Federal estate tax returns”]The estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. More information on this topic will be available soon.[/tlt_accordion_item]
[tlt_accordion_item header=”Estate fiduciary income tax returns”]More information on this topic will be available soon.[/tlt_accordion_item]
[tlt_accordion_item header=”Preparation and filing of estate accountings”]Every personal representative is obligated to account to the Commissioner of Accounts for his/her financial actions in the administration of an estate, unless waived by the Clerk of the Court in the qualification order. If the estate has assets in excess of $15,000.00 you are required to account. More information on this topic will be available soon.[/tlt_accordion_item]
[tlt_accordion_item header=”Preparation of Estate settlement agreements”]
An estate settlement agreement, sometimes referred to as a family settlement agreement, is a unique way of settling an estate outside of the Court’s jurisdiction. In lieu of a protracted, expensive and possibly bitter Probate Court litigation process, estate settlements can allow a streamlined, more harmonious distribution of an estate.
Provided all of the beneficiaries of an estate can agree on a settlement process, an estate settlement agreement can act as a binding and enforceable contract, shielding the administrator or executor of the estate from future liability. In doing so, it also prevents future suit from beneficiaries who may change their minds about how the estate’s assets were originally distributed.
The estate lawyers at Maloles Law can help clients with drafting estate settlement agreements, thereby avoiding more complicated and extended probate litigation.
[tlt_header important=”3″]Overview of the Estate Administration Process[/tlt_header]
What is involved in “probating” a decedent’s estate?
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. Attorney’s fees associated with administering a decedent’s estate are an expense of estate administration, and are thus authorized by law to be paid from the assets of the estate. As such, Personal Representatives (i.e. Executors and Administrators) engage our attorneys 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 and New Jersey.
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. However, if complications arise during this initial process, we counsel our client to accomplish their goal of being appointed as the Personal Representative.
Complying with Notice Requirements to the Beneficiaries and Interested Parties of the Estate:
The Executor or Administrator is legally required to notify beneficiaries and interested parties of the estate administration while it is in process. Pennsylvania Orphans’ Court Rule 5.6. outlines who must receive 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 of who received the required Notice also has to be filed with the Register of Wills.
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. A Proof of Mailing must be filed with the Surrogate’s Court.
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.
Marshalling 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:
State Death Tax Returns
- The Pennsylvania Inheritance Tax Return (Rev-1500) is due within nine (9) months from the date of death of the decedent. This return reports the assets and debts of the decedent. Depending on the relationship of the decedent to the beneficiary, inheritance tax may be due to the Commonwealth. The Personal Representative is responsible for ensuring the filing of these returns, as well as 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-41).
- In New Jersey, the Inheritance Tax Return (Form IT-R) is due within eight (8) months from the date of death of the decedent. The NJ Estate Tax Return (Form IT-Estate) must be filed nine (9) months from the date of death of the decedent. In the alternative, if the estate is wholly exempt from both inheritance and estate taxes Forms L-8 and L-9 can be used to obtain waivers for all assets requiring waivers.
Federal Estate Tax Returns
- If 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.
Estate Fiduciary Income Tax Returns
- The Personal Representative is responsible for ensuring the filing of these returns, as well as the filing of the decedent’s Final Income Tax Returns (IRS Form 1040, PA-40 and NJ 1040) and if applicable, the Estate’s Fiduciary Income Tax Returns (IRS Form 1041, PA-41 and NJ 1041).
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 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.
Settling the decedent’s estate:
A Family 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 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 the Court (Orphans’ Court in Pennsylvania or the Superior Court in New Jersey), the estate is distributed to the beneficiaries of the Will or the intestate heirs of the estate.
Given the complexities and risk 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. Maloles Law, LLC concentrates in the areas of estate planning and probate and provides quality legal services to clients in Pennsylvania and New Jersey.