Probate is the process by which an “Estate” is distributed according to Will or law to heirs of a deceased.
In Pennsylvania the probate process takes about a year and can be longer depending upon the type of assets and number of beneficiaries.
What are the steps of Probate?
- Secure the Original Will and hire counsel. In most instances, only the original Will may be “probated”. The named executor has the choice of counsel to hire. A meeting is set to review the Will and ascertain the distribution language and identify all of the heirs. You may be surprised to learn that the dramatic “reading of the Will” often portrayed in movies rarely occurs. Unless there is a specific reason to do so, only the executor usually meets with the heirs initially.
- Open the Estate. The executor of the Will must be sworn in at the Department of Court Records. The original Will is presented along with a probate petition and the executor literally has to raise their right hand and swear an oath to uphold the laws of the Commonwealth. Clients are often nervous about this step, but they usually agree with me later that the drive to the courthouse is more stressful and takes longer. (When there is no Will, the person sworn in is called an administrator.) There is a fee to open the estate which depends upon a few factors. In Allegheny County for instance, this fee is usually around $200.00. For this fee, counsel receives a “Grant of Letters” which is formal acceptance of the Will with the named executor and “Short Certificates” which is evidence of the appointment of the executor. Once the executor/administrator has been formally appointed they are the person who has the authority and obligation to manage the estate.
- Notice and Advertising. Counsel is required to notify all beneficiaries of their potential interest in the estate. Counsel also advertises in two publications that the estate has been opened. The purpose of this is to notify any potential creditors of the estate.
- Inventory and protect assets. The executor must locate all assets of the estate. Some assets are quite obvious such as real estate, personal possessions and cars. Other assets can be difficult to find depending upon how organized the deceased was. Paper documents such as bank and financial records, deeds and life insurance policies are often difficult to find. Is there a safe or safety deposit box? Did you check under the mattress? Once located, the executor must secure the items and make a report to counsel. Additionally, for financial accounts, counsel will need the date of death values. Usually the bank or financial institution can calculate these amounts. Often the executor will find non-probate items such as life insurance, items the deceased owned jointly with another with right of survivorship and beneficiary designated items such as 401K/IRA accounts. While these items will not pass through probate and the executor does not have ultimate responsibility for them, they should see that the items are passed to the appropriate owner/beneficiary.
- Open an estate bank account. Most estates will need a bank account. The executor may pick the bank of their choice. With a tax identification number and a short certificate, the bank will open an account where the executor may consolidate the cash assets of the estate.
- Debts and expenses. The executor and counsel will determine what debts are valid and if and when they should be paid. When the estate is solvent bills such as funeral expenses and medical bills not paid by insurance are paid first. Other important bills are those associated with the carrying costs of real estate. Utilities, insurance and maintenance must be kept up to date to keep the property secure. Bills such as credit cards are usually paid last.
- Inheritance taxes and Inventory. Within 9 months of the date of death in Pennsylvania the inheritance tax return is due. This tax return is similar to a personal tax return in that you start by listing gross assets, then deduct debts and expenses to determine the net figure subject to taxes. In Pennsylvania the inheritance tax rates are as follows:
a. Direct heirs: Parents, children and children of children 4%
b. Siblings: 12.5%
c. Everyone else: 15%
An Inventory is a formal document required to be filed with the Department of Court Records. The Inventory lists the “probate” assets of the estate.
- Distribution. Once the tax return is approved (usually 6 months from filing) final distribution of assets can be completed. Some assets may have already been distributed by this time depending upon the type of assets and the solvency of the estate.
- Close the estate. The last step in the probate process is to formally close the estate. This is done one of two ways. A Family Agreement is a contract between the executor and the heirs. It contains a summary of the assets, debts and expenses, taxes paid and distributions made. If everyone agrees, this document is signed and filed, and the estate is complete. This is the less formal and less expensive way to close an estate. The second way is via an Accounting. This is a detailed summary of the estate transactions that must be approved by the Court. An accounting is more expensive and more time consuming. An Accounting must be used when there are disagreements among beneficiaries, claims of creditors that are disputed by the estate or when there are minor heirs. An Accounting may also be used when there is a particular reason why counsel or the executor wish to Court to review the estate transactions.
Dealing with the probate process while grieving can be a trying experience. At Pecori & Pecori we have guided thousands of estates through the probate process. It is our goal to make what can be a confusing process as simple and stress-free as possible.