Closing an Estate in Pennsylvania
What is an estate?
An estate refers to a deceased person’s assets—their money and property. Estates can include:
- Real estate—homes, vacation homes, rental properties, commercial properties and land.
- Personal property—vehicles, jewelry, furniture, antiques, artwork, collectibles, electronics, clothing and household goods.
- Financial assets—checking accounts, savings accounts, stocks, bonds, mutual funds, retirement accounts, life insurance policies and annuities.
- Business interests—ownership interests, shares of stock, membership interests, partnership interests and ownership stakes.
- Intellectual property—Intellectual property includes copyrights, trademarks, patents, trade secrets, royalties and licensing agreements.
- Digital assets—This can include email accounts, social media profiles, digital photos and music, digital files and cryptocurrency holdings.
- Debts & liabilities—Debts and liabilities cover things like mortgages, personal loans, credit card debts, medical bills, outstanding taxes and outstanding utility bills.
How do you close an estate?
To close an estate, you must first complete the steps of administering an estate. Below is a brief overview of estate administration. Visit this page for a more comprehensive overview.
- Name a representative/executor—An executor is responsible for managing the estate. As an executor, you will be given the power of attorney to follow the rest of the steps listed here.
- File forms with the Register of Wills—You must register the will at the Register of Wills. Depending on the size of the estate, you may also need to open probate.
- Collect and appraise assets—You will gather the assets from the estate and have them appraised to determine how much money is available through the estate.
- Pay off outstanding debts and taxes—Using the money from the previous step, you will pay off outstanding debts and taxes based on their category. Depending on the size of the estate, some debts may not get paid.
- Distribute remaining assets—After debts are paid and the final taxes are filed from the estate, you can distribute any remaining assets according to the will or, if there is no will, according to the rules of intestacy.
- File a final account with the court—Once you have completed the other steps, you can file a final account with the Register of Wills to close the estate. After the estate is closed, you will be released from your duties as an executor.
Two Ways You Can Close an Estate
There are two ways an estate can be closed in Pennsylvania. The first way is through a formal audit and the second is through a family settlement agreement.
As the executor of an estate closing through a formal audit, you must prepare a formal account of the estate and how it was administered. You will include information about the assets and liabilities, along with an explanation of how you used the assets to resolve the liabilities. You will give notice to any interested parties, including beneficiaries and creditors, that you are filing this audit. Notice must be given within a certain timeframe to allow parties the chance to raise objections. If there are no objections raised, or if the objections have been resolved, you can then file the report with the court and close the estate.
In the case of a family settlement agreement, you will create a similar account explaining assets, liabilities, and the administration you performed. You will then have the beneficiaries of the estate sign this account to show their agreement with your administration. Some family settlement agreements also include a provision to pay the executor from the estate and to hold them harmless in the case of a future discrepancy.
Family settlement agreements are typically cheaper and quicker. Formal audits, on the other hand, tend to be lengthier and pricier. They can be beneficial when parties cannot be located or refuse to sign a family settlement agreement.