Estate Administration – After a Loved One Passes

What is Estate Administration?

When an individual dies, it is often necessary to follow formal procedures in settling the estate. This process is called Estate Administration. Both state and federal law establish certain requirements which must be followed. 

The word “Estate” is used to describe the property and obligations of a decedent (person who has died). “Administration” includes procedures and requirements relating to collecting of assets, satisfying of obligations including debts, expenses, and taxes, and distributing the remaining property to the heirs and beneficiaries.

When is formal Estate Administration required?

In almost every case when a person dies having personal property or real estate, an estate should be administered.

Who administers an estate?

A “Personal Representative” is the individual charged with the administration of an estate. The personal representative works with an attorney in complying with necessary legal requirements. If a decedent has executed a Will during his or her lifetime, the Will should designate the personal representative, who is called an “Executor.

If the deceased person did not have a Will, an “Administrator” will be appointed to handle the estate. The administrator will generally be the surviving spouse or the children of the decedent. The individuals entitled to administer an estate are established by law.

What does a Personal Representative do?

An executor or administrator must obtain the necessary legal documents to enable them to act for the estate. These documents, called either “Letters Testamentary” (for an executor) or “Letters of Administration” (for an administrator), are obtained through the Register of Wills in the county in which the decedent lived at the time of death.

The duties of the Personal Representative include:

• File the Will in the local probate court and ask the court to confirm you as personal representative. Send notice of the probate proceeding to the beneficiaries named in the Will and if necessary, to certain close relatives — in most cases, a surviving spouse and children — who would have been entitled to property had there been no valid Will.
• Locate and manage assets. Locate and secure the deceased person’s assets and manage them during the probate process, which commonly takes about a year. Transfer bank accounts and securities registered in “payable on death” form to beneficiaries; transfer funds in IRAs and retirement plans to named beneficiaries; transfer property left to the surviving spouse (in some states), or transfer assets held in trusts (such as living trusts or AB marital bypass trusts) to named beneficiaries. Depending on the contents of the Will and the financial condition of the estate, this may involve deciding whether to sell real estate or securities owned by the deceased person.
• Handle day-to-day details. Handle day-to-day details, such as terminating leases and other outstanding contracts, and notifying banks and government agencies (e.g. the Social Security Administration, the post office, Medicare, and the Department of Veterans Affairs) of the death.
• Establish an estate bank account. Set up an estate bank account to hold money that is owed to the decedent — for example, paychecks and stock dividends.
• Pay expenses and taxes. Pay continuing expenses — for example, mortgage payments, utility bills, and homeowner’s insurance premiums. The executor must also pay income taxes and file an income tax return for the year in which the person died. If necessary, the executor must pay estate taxes.
• Pay debts and notify creditors. Pay any debts that the estate is legally required to pay. Notify creditors of the probate proceeding; the required method of notice will be established by state law. Creditors then have a certain amount of time to file a claim for payment of any bills or other obligations you haven’t voluntarily paid. As executor, you decide whether a claim is valid.
• Distribute property. Supervise the distribution of property — such as cash, personal belongings, and real estate — to the people or organizations named in the Will or established by law.
• Close the estate. When debts and taxes have been paid and all the property distributed to the beneficiaries, ask the probate court to formally close the estate

Is an Attorney necessary in Estate Administration?

As a practical matter, it is very difficult for a non-lawyer to correctly follow the required procedures in administering an estate without the assistance of an attorney. The personal representative selects the attorney for the estate. If there is a Will, it is a courtesy to the deceased to use the attorney who prepared the Will.

What role does the Will have in Estate Administration?

If the decedent has left a Will, it is filed for probate in the office of the Register of Wills in the county in which the decedent resided. If the Will is valid, its directions are followed in distributing the estate to the beneficiaries.

What is done during Administration?

In the beginning, all assets of the estate, including personal possessions and real estate, are inventoried and sometimes physically gathered. All of the beneficiaries (if there is a Will) or heirs (if there is no Will) are located. They are told that they were named in the Will or have a legal right to receive an inheritance. Funeral expenses, debts, state and federal taxes are paid, and necessary tax returns are filed. 

Sometimes administration may involve the short-term management of a business or corporation or sale of a business or stock in a corporation. There could also be a sale of real estate which was owned by the decedent. 

At the conclusion of the administration period, a final accounting of all assets is presented for approval to the county court. After approval, the distribution of the balance of assets is accomplished. 

The average estate should take about a year to conclude the administration. Large or complex estates may take considerably longer to administer.

What Fees are paid during Administration?

In addition to court costs, fees (usually based on a percentage of the gross value of the estate) are paid to the attorney and to the personal representative. These fees are paid out of the assets of the estate. Fee arrangements should be discussed during the first visit with the attorney who will be involved in the administration of the estate.

What if someone dies without a Will? Do you still have to go through probate?

Yes, probate is still necessary regardless of whether one has a Will or not. If there is a Will, an Executor is granted “Letters Testamentary”. If there is no Will, the Register of Wills appoints an Administrator and grants “Letters of Administration”. Either person has the same powers.

What if there is a Living Trust instead of a Will? Do you still have to go through probate?

That depends. If all of the assets are in the trust, and therefore no assets passing through the Will, then probate is likely unnecessary. However, any assets not part of the trust may be required to be probated. This excludes any assets that have beneficiary designation forms attached to them, such as IRA’s, annuities, 403(b)’s, life insurance, payable on death accounts (PODs, TODs, Totten Trusts), etc.

Does property titled jointly have to go through probate?

No, jointly titled property is a tool used to avoid probate. However, inheritance taxes are still due on the ownership percentage of the decedent.