Overview of 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.
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.
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.
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.
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.
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.
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.
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.