Attorneys at Law
SETTLEMENT OF ESTATES
After a person dies, his earthly affairs must be put in order. If you are the person charged with that responsibility, you are the personal representative and acting in a fiduciary capacity for that person's estate. If you are the personal representative named in a will, you will be called the “Executor” or “Executrix”; otherwise, you will be an “Administrator” or “Administratrix.” You may find your duties relatively simple, or you may be involved with an estate for several years. The work required depends on many factors including how much planning the decedent did while alive, the assets owned by the decedent prior to death, the testamentary plan for disposition of assets, and the situation of the heirs. In any case, you will need to keep very accurate records of your actions.
PROBATE: In some cases it may not be necessary to probate the decedent's will or proceed with a formal administration. We will be glad to discuss the relative merits and disadvantages of the various alternative means of settling smaller estates. The following material is limited to the standard procedure involved in administering an estate.
The first step is to procure the original will and probate it before the Register of Wills. In Westmoreland County, the Register's office is on the Third Floor of the Court House Annex in Greensburg. This is usually a simple procedure; we will prepare the necessary petition, fact statement, and other documents required for probate.
After the will is probated, the Register will issue to the personal representative “short certificates”. These are certificates with a court seal attached verifying that the person named is the personal representative and has the power to administer the decedent's estate. These certificates can be obtained from the Register of Wills as necessary and are given to various individuals and companies who hold the decedent's assets.
ADMINISTRATION: The personal representative must keep an accurate account of all transactions. The law requires that estate funds be kept separate from personal funds. Not only does it simplify bookkeeping to keep a separate account, but there is also a very compelling reason for obeying the law: if you mix estate funds with your personal funds and the Commonwealth of Pennsylvania or the Internal Revenue Service audits the estate, you will find your personal finances being investigated.
To open an estate account at a bank, you will need a taxpayer identification number for the estate. We will obtain this for you from the Internal Revenue Service. There can be a number of tax advantages in reporting estate income separately, and we will attempt to maximize these advantages.
We have a sophisticated computer system for estate accounting. In order to make it work, every receipt and every expenditure must be accurately labeled. To make it easier for both of us, we ask that you let us keep the checkbook so that we can precisely identify each deposit and identify every expenditure. We will not sign checks; that is your responsibility. We will provide postage paid envelopes for communicating with us. We have found that this procedure enables us to complete our work more efficiently and relieves you from the burden of bookkeeping.
TAXES: Pennsylvania imposes an inheritance tax of up to 15% on net assets on death and on transfers of property by a decedent within one (1) year from the date of his death. It is usually necessary to fill out an inheritance tax form and report property subject to the transfer and inheritance tax. Values are established by the personal representative subject to the approval of the Inheritance Tax Department in Harrisburg. In larger estates, it may be necessary to file a Federal Estate Tax Return. The rules governing Federal estate taxes are quite complex and are not discussed here. If the estate is subject to Federal estate tax, we will prepare the necessary tax returns as part of our services.
DISTRIBUTION: After you have gathered the assets of the decedent, paid the creditors and paid the inheritance taxes, the estate is ready to be distributed. Generally, this is accomplished by filing a “First and Final Account” which is a complete record of what you did with everything that was listed in the inventory and any subsequent receipts. This account is presented to the court. Notice that the account will be audited before the Judge of Orphans' Court Division of the Court of Common Pleas of Westmoreland County is advertised in the legal journal and a local newspaper. It is not necessary for the personal representative to attend the audit. However, anyone who has an objection to your administration of the estate can appear at the time and day set for the audit and make known his or her objection to the court. The court will then make a decision on what is to be done.
Because of the necessity to protect and advise the various parties interested in a decedent's estate, the administration of an estate commonly takes one (1) year. Where there is real estate involved, it may be preferable to keep the estate open until the real estate is sold. On the other hand, it is not necessary to wait until the administration is completed before assets can be distributed; it is often possible to make distributions to heirs early in the administration of an estate. We do not like to keep large sums of cash in an estate, and will advise you when it is appropriate to make preliminary distributions.
ATTORNEYS' SERVICES: Generally it is prudent to obtain the services of an attorney in the settling of an estate. A personal representative has many responsibilities and may be subject to personal liability if proper procedures are not followed. There is substantial interaction among various state and Federal inheritance and income tax laws, and one unfamiliar with these may pay an excess amount in taxes or may fail to handle the estate in such a way that good title is passed to a purchaser of real estate.
It is extremely difficult to estimate the amount of time which will be required in settling an estate. In addition, the value of the attorney's knowledge must be applied to the total value of the estate. For that reason, our charge for services in settling an estate is usually a fixed fee based on a percentage of the total estate. This method lets you know in advance what you will pay, lets you have as much communication with us as you want, and is the method most preferred by our clients.
Our fee includes all services required in the ordinary settlement of an estate from the time the initial papers are filed with the court until the estate is closed. We will also take care of any loose ends with the Federal or State income tax departments for a year after the estate is closed. We will charge additional amounts in the following cases:
1. The estate is kept open for more than one year because of complexities or difficulties in selling or transferring assets.
2. A lawsuit is involved and we are called upon to represent the estate in matters not directly related to settlement of the estate.
3. Unusual problems arise involving taxes or other matters.
4. We find it necessary to obtain the advice of experts on matters not ordinarily involved in the settlement of an estate.
We will always consult with you and obtain your written consent before any additional charges are incurred.