Estate Administration in Pennsylvania

How do you get your inheritance when your loved one dies?

When someone dies in Pennsylvania, the law lays out how you must process their assets, pay their debts and obtain your inheritance. This is known as the “estate administration” process. Below, you’ll find definitions for the legal terms involved, an overview of the steps in the process, and some important deadlines to keep in mind. Contrary to popular belief, there’s no reading of the will to attend, and most of the decisions that need to be made can come fairly quickly. This article is designed to help you determine what the next steps are in the estate administration process.

Terms to Know

Assets: This is property or items owned by an individual or entity, including land, houses, cars, jewelry, furniture, bank accounts, investments, intellectual property and more.

Beneficiary: The person or entity set to receive money or other assets from a trust or will.

Estate: The total of someone’s assets and property, along with any debts or obligations.

Distribution: This is the process of transferring assets from an estate to the beneficiaries or heirs according to the will, trust or intestacy laws.

Liquidation: The process of converting assets from an estate into cash. This is typically done to pay off debts, taxes and other liabilities of the estate, or to facilitate the distribution of the estate’s value among the beneficiaries.

Executor/Administrator: This is the person charged with administering the estate of a deceased person.

Residuary estate: Any assets that remain after debts and taxes have been paid and specified gifts have been distributed.

Intestate: Dying without a will.

Next-of-kin: Someone’s closest living relative; may include a spouse, child or other close blood relative.

Probate: The process of filing a loved one’s will with the Court, gathering assets, paying liabilities, filing taxes and closing out the estate.

1. Find the Will, or alternatively, figure out if you need a will

The first step to the estate administration process is to find out if the deceased person left a will. If they did, this document is the Bible that governs the process of administering the estate. In Pennsylvania, wills are not recorded at the courthouse until after someone dies, so you may need to search their safety deposit box, check with local lawyers, look in the gun safe in the basement, or check in other places they may have kept such a document. Banks are required to let you check a safety deposit box for a will upon presentation of a death certificate—although they don’t have to let you take anything other than the will in that case until you have opened an estate.

If there is no will, don’t panic. Pennsylvania has an “intestate statute” that governs who gets what, and also who is in charge of the estate. If you can’t find the will after a reasonably diligent search, the law presumes (in most cases) that there was no will or that it was destroyed.

2. Figure out who the personal representative is: the “executor” or “administrator.”

If you find a will, check the final paragraph (that’s usually where this information is) for the name of the “personal representative” or executor (or executrix if it’s a woman—we’ll simplify by referring to executors throughout this article). This is the person in charge of running the estate, and the rest of this process is in their hands. If the first named executor has died, then the next person is in charge, and so on. No one is required to accept this authority. If the executor named says they don’t want the responsibility, they can “renounce” in favor of the next in line.

So what if the executors named in the will all refuse to act? Or what if there is no will? In that case, there is a statute in Pennsylvania that determines who the administrator is (or administratrix if it’s a woman—the plural is administratrices, and nobody wants to try and pronounce that. We’ll stick with administrators). After most of the nuclear family has had a chance to administer, the list goes on to others, including creditors of the estate.

In other words, if no one in the family wants to act, creditors of the estate are in charge—although they’ll still have to pay the inheritance to the beneficiaries at the end of the process.

There is no difference in the powers granted to executors as opposed to administrators, and for the rest of this article, we’ll talk about executors in reference to all of them.

3. Determine whether to probate

The next step in the process is to open probate—that is, to get a Court Order granting the executor the right to administer the estate. Opening probate permits the executor to use this Court Order to gather the assets of the estate, including closing bank accounts, opening an estate bank account, selling cars, listing a house for sale, and so on. This “short certificate” also gives you the power to pay estate debts from these bank accounts and funds. This means that instead of family members having to chip in for the funeral, you can pay it all from the deceased individual’s funds directly.

To open probate, you’ll have to submit a Petition for Grant of Letters and pay a probate fee to the county Register of Wills. He or she will then issue the short certificate to the executor. If anyone in the family or beneficiaries believes that the will is invalid or that the executor is unfit to serve, this is first step in the process where they can object—and one of the most important.

However, opening probate and getting the short certificate is not always the right move. That’s why we’ve labeled step 3 as a choice of whether to open probate. Especially with smaller estates where there is not much money, the costs of opening and processing an estate can be prohibitive. If there is any way to avoid opening probate, that is preferable. Determining whether probate is necessary is a fact-specific inquiry, and it’s best you consult directly with an estate administration attorney to determine that for your specific situation.

Furthermore, determining where to probate is an important step. Probate should be opened where your loved one was “domiciled.” The domicile is where they were living before they died, but it is usually a bit more involved than simply asking where they were when they passed away. Domicile requires a showing that they intended to remain somewhere, and can take into account such factors as where their driver’s license was, where they were registered to vote and where they intended to return to live upon recovering from an illness.

4. Prepay the inheritance taxes

The Commonwealth of Pennsylvania is only one of six states that charges an inheritance tax. This tax ranges from 4.5% for “lineal descendants,” such as children, all the way up to 15% for certain classes of beneficiary.

If you prepay the taxes, you get a 5% discount off of the total due. This sometimes confuses clients, so let’s put it like this: if you and your fellow beneficiaries are all direct lineal descendants (children, grandchildren, great-grandchildren, etc.), and you will be inheriting $100,000 after all bills are paid, the bill is $4,500 (4.5% of $100,000). If you pay the taxes by the 90-day mark, you’ll receive a discount of 5%, which means you’ll save a whopping $225. Some executors feel these savings are hardly worth the money, while others prefer to hustle to save every penny. This is up to the executor, and can also depend on whether there is enough liquid capital to work with at the 90-day mark.

There is no requirement that you prepay. The taxes are due at 9 months from the date of death, unless you request and receive an extension from the Pennsylvania Department of Revenue.

5. Marshall the assets and pay the debts

From this point on, the estate juggles two obligations. It will gather the assets of the estate. This means that the executor will close all of the individual’s bank accounts and reopen them as estate accounts with the bank of the executor’s choice. The executor will close investment accounts, ensure that IRAs, life insurance and other “non-probate assets” are rolled over to the respective owners, sell cars, oversee the distribution of personal property (including the sale of such property if it is valuable), list the house for sale, and so on. This is an extensive process and can be the most complicated part of estate administration.

The executor will also begin paying the debts of the estate. Pennsylvania law prescribes the order in which debts are to be paid after death, essentially guaranteeing that certain classes of creditor get priority to be paid in full, while others may not get paid at all. If this seems unfair, it’s important to consider the policy reasons behind this. Funeral homes and medical providers get paid first, for example, to ensure that there is no incentive for a medical provider not to invest much work to save someone who is dying on the fear that they may not get paid. Funeral homes are incentivized to ensure that burial is done quickly and properly, with awareness that they are a “first-in-line” creditor.

If the estate runs out of money, and if the law has been followed to the letter, then that’s it. Neither the executor nor the beneficiaries of the estate are required to “chip in” money to cover these debts. However, this is why it is vital that debts be paid in the right order. If the executor pays them out of order, then the executor may be personally responsible to pay creditors who were higher in priority. This avoids a situation where an executor prefers certain creditors because he or she knows them personally or prefers to thank them for their work for the decedent. Simply put, Pennsylvania law controls the debt payment process, and it’s important to follow these rules precisely.

As the estate proceeds, there are often insufficient funds to pay debts. For this reason, as a practical matter, marshalling assets into the estate must sometimes be completed before any debts can be paid. For most debts, there is no need to pay immediately. Monthly bills must generally be held once someone passes, although there may be reasons to go ahead and continue to keep a specific bill current.

6. Other considerations

Of course, this doesn’t cover everything. Estate administration comes with a host of other questions dependent on your unique situation. If your loved one died in a car accident or as a result of someone else’s negligence or intentional action, you may have a wrongful death claim to consider. If the will is not properly executed, there may be a dispute over who the proper executor is, or who inherits under the will. In some cases, family members may believe that undue influence was brought to bear on the decedent when he or she drafted the will. In all these cases, it’s important that you speak to an experienced estate administration lawyer to discuss your options and the risks facing you and your family.

Tips for Posthumous Wealth Oversight

Administering an estate can feel overwhelming, so here are some tips for tracking assets (a process sometimes referred to as Posthumous Wealth Oversight).

Make a detailed list of assets.

To start tracking assets, you’ll need to know what assets are part of the estate. Create a detailed list of all the assets included in the estate, how much the assets are worth and where the assets are going.

This list should include:

Real estate deeds and property valuations,
Bank account and investment account statements,
Vehicle titles,
Artwork, jewelry, collectibles, furniture, and all their valuations,
And business interests and intellectual property.

You should also include information about jointly held assets. These are often handled differently but, depending on the situation, they can still impact the estate.

Once you have a list with all the assets, you should keep it updated as the assets are distributed or liquidated. This will help you to keep track of which creditors and beneficiaries have received their shares of the estate and which ones are still waiting. You can also use this list to answer any questions or address any issues that may arise.

Get the estate’s assets appraised.

Appraisals can help you to calculate the fair market value for each asset in an estate. Determining the fair market value is important for ensuring the accuracy of estate taxes. This can also help you to liquidate assets and divide them among beneficiaries and creditors. Any appraisals you have done should be completed by qualified experts.

All of the assets listed above are examples of assets that can be appraised. You should also have any items that carry sentimental value appraised.

Where should I look if I can’t find an estate’s assets?

Sometimes it can be difficult to find the necessary documents for administering an estate. If you are struggling to locate the assets and liabilities for an estate, try the following.

Search the Decedent’s Personal Records—Start by looking through the decedent’s home. Check filing cabinets, safes, desk drawers and other storage areas. Some people keep important documents in expected places, so if the obvious locations don’t yield results, check the less obvious. You should also search any computers, email accounts and cloud storage for digital records.
Check with Friends and Family—Relatives or close friends may know about the decedent’s financial affairs. They may also know the location of important documents. Check with them to see if they can help you locate what you need.
Check with the Known Financial Institutions—If there is a safe deposit box, check to see if any documents have been stored there. You can also contact banks, credit unions or investment institutions for information. Examine recent bank and credit card statements and previous tax returns to see if there is any evidence of assets or liabilities.
Contact the Decedent’s Professional Advisors—If the decedent worked with any attorneys, accountants or financial advisors, ask them for information about the estate’s assets and liabilities.
Check for Unclaimed Property—You can conduct a search online for unclaimed property in the state where the decedent lived and/or conducted business. State offices track unclaimed financial assets like bank accounts, stocks, uncashed checks and insurance payouts. You can search for unclaimed property in Pennsylvania or on a national level with the National Association of Unclaimed Property Administrators.
Contact Former Employers—Contact the decedent’s former employers for information about pension plans, 401(k)s or other retirement benefits. You should also ask if the decedent had any stock options.
File for Probate—Filing for probate may help to speed up the process of locating documents. If any of the above people or institutions are dragging their feet on producing information for you, the court’s intervention may compel them to do so.
Seek Help from an Attorney—If you’re still unable to locate specific documents after trying these methods, it may be necessary to consult with an estate attorney to determine the best course of action. The attorneys at Cornerstone Law Firm would be happy to assist you with locating assets and administering the estate in question.

A Cornerstone attorney speaking with a Cornerstone paralegal

Conclusion

Estate administration can be complicated, but it doesn’t need to be stressful. Your family will want to focus on the grieving process, and on cherishing your memories. Our attorneys and staff at Cornerstone Law Firm can assist you by handling the details of the estate, providing you with confident answers to your questions, and ultimately can save you money in taxes and costs by assisting you in administering the estate. For executors who live out of the area, our recommendations of realtors, appraisers, accountants and more can save you time and stress in finalizing the details of the estate. Contact us today for a free consultation about the estate of your loved one.

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