Probate & Administration
Baratta Russell and Baratta’s estate attorneys routinely guide executors, administrators and trustees through the process of probate and administration of estates and trusts.
Our experienced lawyers are familiar with the administration process in Pennsylvania and New Jersey and will bring the estate to close as efficiently and quickly as possible. We will prepare and file required tax returns and counsel as to opportunities to avoid current or future taxation through the treatment of assets of the estate. Often, complex issues arise as a result of tax or legal hurdles, and our firm is adept at negotiating a resolution that will benefit all interested parties.
What is Probate?
Probate is the process by which a deceased person’s estate is administered. Technically, probate refers to the administration of the estate of a person who dies testate, or with a will. The estate of a person who dies intestate, without a will, will have their estate undergo the “administration” process.
The process of probate and administration is substantially the same, with the primary issue being that a will identifies the beneficiaries of a person’s estate. A person without a will has their beneficiaries decided by state law, which can lead to unintended and undesirable consequences. In either case, the estate must be opened by the court, usually acting through the Register of Wills. The Register of Wills will appoint a personal representative (the executor of the will, or the administrator of an intestate estate). The process will typically take nine months to one year, and can take longer, depending on the complexity of the estate.
Role of the Personal Representative
The Register of Wills will appoint a personal representative (the executor of the will, or the administrator of an intestate estate). Typically, the powers and duties of the personal representative are spelled out in the Will and in state law. After appointment, the personal representative must make appropriate notification of all beneficiaries and advertise for potential creditors. The personal representative is charged with gathering the decedent’s assets, identifying and settling the decedent’s debts, paying taxes, and making distributions to the appropriate beneficiaries.
The personal representative has the sole authority to act for the estate, and has a fiduciary obligation to the estate’s beneficiaries to efficiently and properly manage the estate’s assets. To the extent a Court finds that the personal representative failed to properly manage the estate, he or she may be personally liable for damages even if there was no intentional misconduct.
The personal representative has the power to transfer estate assets and sell them to pay liabilities and taxes. The personal representative may hire advisors to assist with the many complicated legal and tax issues that arise during the administration.
Closing the Estate
Once all assets are marshaled and debts and taxes are paid, the estate must be closed. There are two ways of “closing” an estate.
First, if all beneficiaries are in agreement as to the administration, the estate can be closed informally. In Pennsylvania, a family settlement agreement will usually be prepared, which will set out the remaining estate assets and schedule of distributions. The beneficiaries will release the personal representative and promise to return their distribution in the event of any future claims.
The other alternative is to file a petition for approval of the personal representative’s accounting in the Orphan’s Court. The personal representative will prepare and file an accounting, which is a summary of all transactions made for the estate. The beneficiaries will have the opportunity to object to anything in the accounting they feel is improper. The Court will resolve any disputes and close the estate (this is called the adjudication). While this process is more formal and expensive than a family settlement agreement, it is necessary for complex estates or estates where there is disagreement among the parties.
Estate matters involve emotional issues, including, most importantly the division of assets. Our firm works diligently to avoid litigation, but in some cases litigation avoidance is not possible. In those cases, our firm is able to provide our clients high caliber, aggressive and experienced Orphan’s Court litigators. Whether a Will contest, a contested guardianship or challenging the conduct of the trust or estate’s fiduciaries, our firm will guide you through the unique challenges of Orphan’s Court litigation. Although initially attempting to avoid litigation, our clients know that once litigation is commenced, our litigation efforts will be tireless and aggressive and we will take all actions necessary for them to achieve their desired litigation result.
Attorneys’ Fees and Support for Estate Executors
Most individuals are unfamiliar with the probate and administration process. Between the legal requirements and tax filings, it is complicated and if not managed properly, can result in personal liability for the executor or administrator. For these reasons, many personal representatives seek the guidance of experienced estate attorneys. The fees for such representation are payable from the estate assets, and may be charged hourly or based upon an agreed-upon percentage of the estate assets.
Intestacy, or Dying without a Will
Intestacy occurs when a person dies without leaving behind a will. Baratta, Russell and Baratta handles matters of intestacy for clients. For more information, click here.
Taxes Associated with an Estate
There are a variety of tax matters and responsibilities that impact estates. The primary ones include:
Final Income Tax Filing
The personal representative of an estate will have to file a final income tax return for the part of the year in which the decedent was alive. This applies to both federal and state income tax.
Fiduciary Income Tax
For income tax purposes, the state and federal government look at an estate as a separate person who has to pay tax on income received. To the extent that the estate receives income in the form of dividends and capital gains, it will have to file a fiduciary income tax return for each year in which it is open. The same rules apply to a trust. The trustees are required to file fiduciary income tax returns on income received by the trust.
Estates are taxed at both the state and federal level upon the death of the estate holder.
- State-Level Estate Tax
- Federal Estate Tax
Guardianship is the legal process by which a person is declared to be incapacitated and a guardian is appointed to manage their financial and medical affairs. In order to be appointed guardian of a disabled loved one, a person must file a petition with the Orphan’s Court asking that the loved one be adjudicated to be incapacitated.
According to Pennsylvania state law, an incapacitated person is one who “whose ability to receive and evaluate information effectively and communicate decisions in any way is impaired to such a significant extent that he is partially or totally unable to manage his financial resources or to meet essential requirements for his physical health and safety.” (20 Pa. Cons. Stat. Ann. § 5501)
Notice of the petition will be sent to family and interested persons who will have the opportunity to object. Testimony from a medical expert or health care provider as to the person’s capacity is usually necessary.
The Court can appoint a limited guardian, with certain conditions and limitations, or a plenary guardian of all the affairs of the incapacitated person. The Court will appoint a guardian of the estate to manage financial affairs and a guardian of the person to manage medical and personal affairs. These can be the same person.
Trust, Estate and Fiduciary Litigation
In Pennsylvania, the Orphan’s Court has jurisdiction over litigation arising in the area of probate, estates and fiduciaries. Orphan’s Court litigation can involve non-adversarial proceedings, such as a petition for approval of an accounting by an executor, administrator or trustee, or an unopposed petition to modify or terminate a trust. Orphan’s Court litigation also involves disputes, such as will contests or objections to the accounting or conduct of an executor, administrator or trustee. If the Court determines that a fiduciary acted improperly in administering an estate or a trust, the Court can remove the fiduciary and can surcharge him or her, meaning that the fiduciary becomes personally liable for damages to the estate.
Another type of litigation commonly seen in Orphan’s Court involves disputes over joint bank accounts and other “non-probate” assets that do not pass under the will but which can have tremendous value.
A will contest is a lawsuit in which a beneficiary or potential beneficiary of an estate seeks to invalidate a Last Will and Testament. There are traditionally two theories by which a will may be challenged:
Lack of Capacity
Claiming that the testator (person making the will) was not competent to execute a will at the time it was made.
Claiming that the testator was improperly influenced to make a decision by some person in a trusting relationship to the testator.