Probating a Pennsylvania Estate

Probating estates is also referred to as estate administration which is the process of managing and distributing a person’s probate property after their death. If the person had a will, the will goes through probate, which is the process by which the deceased person’s property is passed to his or her heirs and legatees (people named in the will). The entire process usually takes about 18 months. However, distributions from the estate can be made in the interim.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor in the deceased family member’s will. You should meet with an attorney to review the steps necessary to administer the decedent’s estate. Bring as much information as possible about assets, taxes and debts. Estate administration in Pennsylvania include the following steps:

  1. 1. Filing the original will and Death Certificate at the County Register of Wills in order to be appointed executor. You will take an oath, sign the petition and pay a probate fee to get the letters testamentary issued to you appointing you as executor. In the absence of a will, heirs must petition the court to be appointed administrator of the estate and may have to post a bond.
  2. 2. Giving formal notice to all the beneficiaries named in the will, and then filing a report with the Register of Wills.
  3. 3. Collecting all the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an Inventory with the Register of Wills within nine months of the date of death. You will also need to open an estate bank account to consolidate all the estate funds. Bills and bequests should be paid from the estate bank account, so that you can keep track of all expenditures.
  4. 4. Paying the federal estate tax if applicable and Pennsylvania inheritance taxes. If the estate was over $5,490,000 then a federal estate tax return needs to be filed for 2017. If any assets pass to anyone other than the spouse you need to file a Pennsylvania inheritance tax return. If you prepay the Pennsylvania Inheritance Tax within three months of the date of the death you receive a 5% discount. The Pennsylvania inheritance tax return is due nine months after the date of death, but you can apply for a six month extension to file the return.

    5. Filing final income tax returns. You must also file a final federal and Pennsylvania income tax return for the decedent for the year of death. If the estate holds any assets and earns over $600 of interest or dividends, or over $600 from sales of property a fiduciary income tax return for the estate will need to also be filed.

    6. Paying the administrative expenses and all the debts of the estate. The estate needs to pay for the funeral, probate fees, attorney fees and other administrative expenses first. The secured creditors are paid next, and then the unsecured creditors are paid with whatever is left. If creditors are not paid in the proper order, the executor may be held personally liable for the estate’s debts.

    7. Filing a Disclaimer with the Orphan’s Court within 9 months of the date of death.

    8. Distributing property to the heirs and beneficiaries. Generally, executors do not pay out all of the estate assets until after all the known creditors are paid, and the period runs out for other creditors to make claims.

  5. 9. Notifying the Pennsylvania Attorney General for any specific bequests over $25,000 or any bequests paid as percentage of the estate or any charitable bequests that will not be made.
  6. 10. Filing an informal final account. The executor must file an informal final account with all the beneficiaries listing any income to the estate since the date of death and all expenses and estate distributions. Once the beneficiaries sign a receipt and release approving the informal final account, the executor can distribute whatever is left in the reserve, close the estate bank account and file a status report with the Register of Wills.

If you need help probating an estate please contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

Probating estates is also referred to as estate administration which is the process of managing and distributing a person’s probate property after their death. If the person had a will, the will goes through probate, which is the process by which the deceased person’s property is passed to his or her heirs and legatees (people named in the will). The entire process usually takes about 18 months. However, distributions from the estate can be made in the interim.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor in the deceased family member’s will. You should meet with an attorney to review the steps necessary to administer the decedent’s estate. Bring as much information as possible about assets, taxes and debts. Estate administration in Pennsylvania include the following steps:

  • 1. Filing the original will and Death Certificate at the County Register of Wills in order to be appointed executor. You will take an oath, sign the petition and pay a probate fee to get the letters testamentary issued to you appointing you as executor. In the absence of a will, heirs must petition the court to be appointed administrator of the estate and may have to post a bond.
  • 2. Giving formal notice to all the beneficiaries named in the will, and then filing a report with the Register of Wills.
  • 3. Collecting all the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an Inventory with the Register of Wills within nine months of the date of death. You will also need to open an estate bank account to consolidate all the estate funds. Bills and bequests should be paid from the estate bank account, so that you can keep track of all expenditures.
  • 4. Paying the federal estate tax if applicable and Pennsylvania inheritance taxes. If the estate was over $5,490,000 then a federal estate tax return needs to be filed for 2017. If any assets pass to anyone other than the spouse you need to file a Pennsylvania inheritance tax return. If you prepay the Pennsylvania Inheritance Tax within three months of the date of the death you receive a 5% discount. The Pennsylvania inheritance tax return is due nine months after the date of death, but you can apply for a six month extension to file the return.

    5. Filing final income tax returns. You must also file a final federal and Pennsylvania income tax return for the decedent for the year of death. If the estate holds any assets and earns over $600 of interest or dividends, or over $600 from sales of property a fiduciary income tax return for the estate will need to also be filed.

    6. Paying the administrative expenses and all the debts of the estate. The estate needs to pay for the funeral, probate fees, attorney fees and other administrative expenses first. The secured creditors are paid next, and then the unsecured creditors are paid with whatever is left. If creditors are not paid in the proper order, the executor may be held personally liable for the estate’s debts.

    7. Filing a Disclaimer with the Orphan’s Court within 9 months of the date of death.

    8. Distributing property to the heirs and beneficiaries. Generally, executors do not pay out all of the estate assets until after all the known creditors are paid, and the period runs out for other creditors to make claims.

  • 9. Notifying the Pennsylvania Attorney General for any specific bequests over $25,000 or any bequests paid as percentage of the estate or any charitable bequests that will not be made.
  • 10. Filing an informal final account. The executor must file an informal final account with all the beneficiaries listing any income to the estate since the date of death and all expenses and estate distributions. Once the beneficiaries sign a receipt and release approving the informal final account, the executor can distribute whatever is left in the reserve, close the estate bank account and file a status report with the Register of Wills.

If you need help probating an estate please contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

Gifting as an Estate Planning Tool

Person being handed a house

The annual Exclusion for 2014 is $14,000 and is indexed for inflation so it will increase in the future. The person making the gift is the donor and the recipient of the gift is known as the donee. The donee never pays income tax on any gifts received because the Internal Revenue Code Section 102 specifically excludes gifts from income. If you have a large estate and want to use gifting to reduce your estate or inheritance tax you may want to consider one or all of the following strategies:

  • You can gift up to $14,000 in 2014 to any individual or you can make a joint gift with your spouse of $28,000 per year per person without affecting your $5.34 million estate tax exemption or unified credit. Keep in mind if you decide to gift a larger amount than the annual exclusion you can file a form 709 gift tax return and use up some of your $5.34 Million estate exemption.
  • You can also pay a donee’s tuition directly to the school which would not count toward the $14,000 annual exclusion.
  • If you pay a donee’s medical bills directly to the hospital or health care provider which also would not count toward the $14,000 annual exclusion.
  • You can also donate to a donee’s 529 College Savings Plan and give $70,000 individually or $140,000 with your spouse to make a joint gift to reduce your estate. However, if you give the maximum it wipes out your annual exclusion for that specific donee for the next 5 years. You can also change the donee in the future if that donee decides not to attend college. If the donee does attend college the amount withdrawn from the 529 plan to pay for tuition, books and fees are free of income tax.
  • If you have your own corporation or limited liability company (LLC) and you have a child or relative who works in the business, you can gift non-voting shares of the corporation or non- voting units of the LLC to that person over time but maintain control since you own all the voting shares.
  • If you have any questions about any of the gifting strategies listed above, feel free to contact Gregory J. Spadea at 610-521-0604. Gregory is the managing member of Spadea & Associates, LLC located in Ridley Park, Pennsylvania.

What Type of Expenses Are Deductible on The REV 1500 Pennsylvania Inheritance Tax Return?

You should keep receipts for the following expenses which are deductible on the PA Inheritance Tax Return and the PA final PA-41 fiduciary return:

  1. Funeral costs including luncheon and head stone;
  2. Attorney, Accounting and Appraisal fees and Real Estate Commissions;
  3. Final medical bills;
  4. Final utility bills including cable, internet, telephone, gas and electric;
  5. Costs incurred to sell assets of the estate including real estate taxes and property insurance;
  6. Probate Fees paid to the Register of wills;
  7. Probate publication fees;
  8. Executor Travel Expenses;
  9. Cost of a Posting a Bond;
  10. Debts of the Decedent;
  11. Federal and Pa Income Tax paid with final income tax returns.

Contact Spadea & Associates, LLC at 610-521-0604 if you need help administering an estate or find yourself being appointed as an Executor.

Why Should I Have a Will?

A will is the starting point of any good estate plan. A will is a legal document that directs how your estate is administered and allows distribution of your assets to your named beneficiaries and contingent beneficiaries after your death. A properly drafted will protects your family by helping them meet their future financial needs after your death. A will minimizes your taxes by reducing the size of your taxable estate. Having a will also avoids intestacy proceedings to determine how your estate should be distributed. Having a will also avoids your beneficiaries from posting a bond to probate your estate. It is very important to name an executor who is responsible for settling the estate, filing all the inheritance tax, estate tax and income tax returns and carrying out the provisions of the Will.

It also enables you and your spouse to set up a testamentary trust for your children if you both were to die at the same time. You would also name a trustee that would watch over the trust assets and distribute them to pay for support, education and maintenance of your children until they reach twenty five or any age you and your spouse deem appropriate. A will allows you to name a guardian to raise minor children, which avoids having the Orphans Court appoint a guardian based on the information it can gather after you and your spouse die.

You can state in your will that you may leave a memorandum suggesting the distribution of certain personal items that you want distributed after your death such as jewelry, china, coin collections, memorabilia, tools or golf clubs etc. You can avoid potential conflict by leaving a signed and dated list with your will explaining who should get these personal items.

You should consider updating your will if any of the following occur:

1. Substantial increase or decrease in your estate assets.
2. You retire or sell your residence.
3. If you get married or get divorced.
4. Any new births or deaths in your family.
5. You move to another state or country.
6. You start a business, add a partner or terminate one.
7. The federal estate tax or income tax laws change.
However, a will only covers assets in your name. It does not cover jointly owned assets or assets with named beneficiaries such as retirement or brokerage accounts. Therefore you should regularly update your beneficiary designations on those types of accounts.
The most important thing a will gives you is peace of mind knowing that your family and loved ones are taken care of.

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