WHAT TO EXPECT DURING THE PROBATE PROCESS IN PENNSYLVANIA
What to Expect During the Probate Process in Pennsylvania
If you have the responsibility of administering a loved one’s estate, you are probably wondering, “What do I do now?” This brief guide will help you understand your responsibilities in more detail.
If your loved one had a Will, it most likely will have to be offered for probate. Generally speaking, probate in Pennsylvania is informal and inexpensive. Unlike some other states that mandate Court supervision of the probate process, Pennsylvania allows for a decedent’s Personal Representative (sometimes also referred to as an Executor or Executrix) to handle the process from beginning to end usually without ever needing to see a Judge.
However, just because the process is informal, doesn’t mean you should not take it seriously. Failure to follow sound estate administration practices can result in litigation, personal financial liability and even criminal liability on the part of the Personal Representative if missteps are made.
Question #1: What is Probate?
Probate is the process by which a Will is proven to be valid and legally binding. At the beginning of the process, if you are the named Personal Representative, you will be sworn in as such by the Register of Wills in the county in which the Decedent resided. The Register of Wills then issues “Letters of Administration” which is the formal grant of authority for you to act on behalf of the estate.
Question #2: Do all assets pass through Probate?
No. Some assets are considered “non-probate”. This means that they will automatically pass upon your loved one’s death to joint owners, trust beneficiaries or individuals named on beneficiary forms. It is important to note that although an asset is non-probate, it is most likely subject to Pennsylvania Inheritance Tax, which is discussed below.
Question #3: What duties do you, as the Personal Representative, have?
As soon as possible after your loved one’s death, you should locate the original will and safeguard it until it can be taken to the courthouse. Your exact duties will depend upon many things, including the nature of the assets in the estate, where the assets are located, the age of the beneficiaries, and whether or not the assets are sufficient to pay the debts. In the simplest terms, you will have the duty to gather and secure the assets, value the assets, identify the debts, make sure debts and taxes are paid, and to distribute assets to the beneficiaries.
Once you are sworn in, you have undertaken an obligation which, if not executed properly, can expose you to personal financial liability. Because of that risk, and due to the complexity of notice requirements, decisions regarding investments, and compliance with state and federal tax laws, it is prudent to engage legal counsel and an accountant to advise you through the process.
It is important that you are prepared to act promptly after your loved one’s death. There are important deadlines that arise during the administration of an estate. Failure to comply with those deadlines can result in missed opportunities to minimize taxes and could result in financial penalties.
Question #4: The family arrived and took what they wanted from the house. Is this a problem?
Yes, it is a problem. First of all, you have a duty to secure all of the assets of the Decedent. Those assets must be preserved until you have determined if all taxes and debts can be paid (including Medicaid liens if your loved one was receiving financial assistance to pay for nursing home care). It may be necessary to liquidate some or all personal property and household goods in order to pay taxes and debts.
Second, all personal property and household goods are subject to inheritance tax. Accordingly, such goods have to be valued and included on the Pennsylvania Inheritance tax return. You will have to sign that tax return under penalty of perjury, so you must have an accurate inventory and valuation of personal property and household goods. If family members are allowed to take items before a valuation occurs, you will have great difficulty accomplishing that task.
Third, if the Will directs that all family members are to receive an equal share of the estate, a valuation of personal property and household goods is necessary to ensure equality of those shares. For example, if your brother takes a rare antique grandfather’s clock, but your sister takes the coffee mug that your loved one used every day, their shares of the estate will not be equal. Therefore, unless you make up the difference in another distribution to your sister, she would be justified in challenging the settlement of the estate.
Finally, special care should be taken if firearms are among the belongings of the Decedent. You should be aware that there are federal and state restrictions on who may lawfully possess firearms. Therefore, as long as none of those restrictions apply to you, you should immediately secure those firearms and not distribute them to anyone before a proper transfer can be made. If firearms are transferred to the wrong individuals, you may have both criminal and civil liability.
Question #5: What taxes are involved?
Unfortunately, Pennsylvania is one of the few states that have inheritance tax on almost all transfers to anyone other than a spouse and/or a charity. Pennsylvania Inheritance Tax is in addition to any Federal Estate Tax. There are limited agricultural and small business exemptions that may apply, and result in a greatly reduced tax liability. Therefore, it is very important to consult with legal counsel to make sure that the estate complies with all state and federal tax laws, but also takes advantage of any potential savings. Pennsylvania inheritance taxes must be paid no later than nine (9) months after your loved one’s death.
In estates in excess of the $11.4 million exemption in 2019, there is a Federal Estate Tax that will apply. Although very few families are currently affected by the estate tax, federal tax laws may change and apply to smaller estates in the future. What is relevant is the Federal Estate Tax exemption that is in effect in the year in which the Decedent passes away.
Question #6: What costs are involved?
Court fees for probate are relatively minimal and vary according to the size of the estate. You are also entitled to take a fee for your work as the Personal Representative. Fees will also be charges by any professional engaged by your Personal Representative, such as a realtor, auctioneer, accountant, and attorney. These fees and costs should be paid from your estate funds before assets are distributed to beneficiaries.
Question #7: How long does the process take?
Generally, estates take approximately 9 -12 months to completely administer. However, many things can affect this time frame negatively. It is not unusual for estates to remain unsettled for years until a piece of property is sold.
The most common reason for a delay is a beneficiary or creditor who objects to an action taken or not taken by the Personal Representative. These matters can be very costly and time consuming. Beneficiaries should not expect to receive their full inheritance until it is clear that all debts of the estate have been satisfied, and that there are no objections filed.
Question #8: What if my loved one didn’t have a Will?
If there is no will, the Commonwealth of Pennsylvania has set forth rules for how the probate estate is to be distributed upon your loved one’s death.
Typically, the next of kin will serve as the Administrator of the estate. However, if the next of kin does not live in Pennsylvania, it will likely be necessary for him or her to post a bond with the Register of Wills in order to serve.
Thank you for taking the time to read this Q&A about the probate process in Pennsylvania. The information contained herein is very brief and general in nature, and is not intended to be a substitute for competent legal and tax advice. Each situation is different and the complexity of an estate and risk of liability is not necessarily determined by the monetary value of an estate. Therefore, it is always prudent to consult with an attorney before embarking on the probate process.
Prepared by Nancy H. Meyers, Esq., Shareholder of Salzmann Hughes, P.C. and Chair of the firm’s Estates and Trusts Practice Group. This information is provided for general informational purposes only and not intended as legal advice.