Losing a loved one is a difficult time for any family. The challenges of dealing with a parents estate only add to the stress and anxiety caused by the loss of a loved one. Without proper planning and communication these complications can lead to family disputes, hurt feelings, and strained relationships.
Here are some steps on what to do when a parent passes away:
1. Determine if a Will Exists
If a Will exists, it will provide instructions on who are the beneficiaries of the parent’s estate, who is the executor, and any specific gifts or instructions. If no Will was ever drafted or signed by the parent, then Pennsylvania state law will determine who may act as the representative of the estate, and who is to inherit the parent’s property.
It is important to note that if there is no will that names a specific executor, anyone on the same level of relationship (i.e. children of the decedent, grandchildren, nieces, nephews, etc.) would have an equal right to act as the representative of the estate. If all parties cannot agree on who should be the representative, or cannot agree to all act together, a Petition must be made to the County Orphan’s Court to determine who is best suited for the role.
2. Open the Probate Estate
The “estate” is the legal term for all of the property owned by the person that passed away. Probate is the legal process that allows the deceased person’s estate to pass to their heirs or beneficiaries, while making sure that all final expenses are paid in the process.
When a person passes, all of their assets become must go through the probate process in order for the beneficiaries to receive their inheritance. The first step to begin the probate process is to review the will or determine who will act as the representative if no will exists. Once the representative has been determine, a Petition for Probate must be filed with the Register of Wills in the County the individual resided in when they died.
There are many complications that can arise at this phase which may prevent or delay the opening of the estate. Multiple wills may exists if the person drafted more than one will throughout their life and did not dispose of earlier wills, the family may have a copy of the will but are unable to locate the original, or if no will exists, there may be a dispute as to who should act as the representative of the estate. An experienced probate attorney can assist in opening the estate in any of these situations.
3. Paying Taxes
Benjamin Franklin once said only two things are certain in life, death and taxes. When a person passes away in Pennsylvania there are several taxes which may be part of the probate process: (1) The individual will likely have to file a final income tax return for the year they died if they had any income (federal, state, and local); (2) the federal government assesses an estate gift and inheritance tax on all estates, however there is currently a $11.2 million dollar exemption per person, so most individuals do not need to be concerned with this tax; (3) Pennsylvania imposes an inheritance tax on all estate regardless of size. The personal representative must file a Pennsylvania Inheritance Tax Return and pay the inheritance taxes within nine months after the decedent’s death. The tax rate varies and is based on the individuals receiving the inheritance. Spouses are taxes at 0%, children and grandchildren are taxed at 4.5%, siblings at 12%, and everyone else is taxed at 15%. The decedents debts and final expenses can be used as deductions against this tax. These tax returns can be complicated and there is currently no software available to the public to help prepare these returns (turbo tax, taxact, and other income tax preparation software are not designed to prepare Pennsylvania Inheritance Tax Returns).
If the deceased individual had any outstanding tax issues with the state or federal government, those tax matters would have to be addressed by the personal representative. An attorney or CPA may be able to obtain a tax transcript from the IRS which would outline any tax returns filed and any outstanding balances.
4. Pay Final Debts and Expenses
The personal representative needs to determine what the decedent’s final debts were and make sure all valid debts are paid. Remember, none of the beneficiaires are personally responsible for the debts, but the estate must pay all debts before any beneficiary is entitled to their share. Creditors have up to one year after death to make their claim against the estate and the representative must pay all claims made during that time, or make disputes through the courts. It is often a good idea to run a final credit check through the credit reporting bureaus and freeze the person’s credit so no fraudulent loans or credit cards can be opened in the person’s name.
There are also many expenses that come with the probate process, hiring attorneys and CPAs, probate fees and taxes, shipping costs, travel fees, and more. The estate must bear the responsibility of paying all of these expenses before any beneficiary is entitled to their inheritance.
5. Transfer Assets
The probate process also deals with the transfer assets to the beneficiaries or heirs. Some assets might be transferred directly such as stocks, bonds, or personal effects. Other assets such as real estate, vehicles, or stocks may be sold by the represnetiatve and the money eventually transferred to the beneficiaries. The representative may have some discretion in determining when and how to sell assets, however, time is of the essence as real estate can accure taxes and have mortgage payments that cost the estate money, stocks and bonds may lose value, and vehicles can age and wear even if not being used and lose value. Failure by the representative to promptly sell assets could lead to a loss in value and subject the representative to liability in the event a beneficiary was unhappy.
Before Choosing an Estate Planning Attorney
If you are dealing with a death in the family, you may want to consider your options. Speak with an attorney in your area to learn more about estate administration. An experienced attorney can help you navigate the complex and emotional process.
Cherewka Law has committed the last 30 years to provide clients with the best lawyers possible. We also take pride in our Estate settlement team, consisting of estate planning attorneys, as they deal with tricky cases that help families acquire the properties they desire. Contact us today to speak with estate lawyers near you.