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Estate Administration
Probate is the process by which a deceased
person's property, known as the "estate," is passed to his or her heirs and
legatees (people named in the will). The entire process, supervised by the
probate court, usually takes about a year. However, substantial distributions
from the estate can be made in the interim.
The emotional trauma brought on by the death of a close family member often is
accompanied by bewilderment about the financial and legal steps the survivors
must take. The spouse who passed away may have handled all of the couple's
finances. Or perhaps a child must begin taking care of probating an estate about
which he or she knows little. And this task may come on top of commitments to
family and work that can't be set aside. Finally, the estate itself may be in
disarray or scattered among many accounts, which is not unusual with a
generation that saw banks collapse during the Depression
The exact rules of estate administration
differ from state to state. In general, they include the following steps:
1.
Filing the will and petition at the probate
court in order to be appointed executor or personal representative. In the
absence of a will, heirs must petition the court to be appointed "administrator"
of the estate.
2. Marshaling, or collecting, the assets. This means that you have to find out
everything the deceased owned. You need to file a list, known as an "inventory,"
with the probate court. It's generally best to consolidate all the estate funds
to the extent possible. Bills and bequests should be paid from a single checking
account, either one you establish or one set up by your attorney, so that you
can keep track of all expenditures.
3. Paying bills and taxes. If an estate tax return is needed---generally if the
estate exceeds $675,000 in value---it must be filed within nine months of the
date of death. If you miss this deadline and the estate is taxable, severe
penalties and interest may apply. If you do not have all the information
available in time, you can file for an extension and pay your best estimate of
the tax due.
4. Filing tax returns. You must also file a final income tax return for the
decedent and, if the estate holds any assets and earns interest or dividends, an
income tax return for the estate. If the estate does earn income during the
administration process, it will have to obtain its own tax identification number
in order to keep track of such earnings.
5. Distributing property to the heirs and legatees. Generally, executors do not
pay out all of the estate assets until the period runs out for creditors to make
claims, which can be as long as a year after the date of death. But once the
executor understands the estate and the likely claims, he or she can distribute
most of the assets, retaining a reserve for unanticipated claims and the costs
of closing out the estate.
6. Filing a final account. The executor must file an account with the probate
court listing any income to the estate since the date of death and all expenses
and estate distributions. Once the court approves this final account, the
executor can distribute whatever is left in the closing reserve, and finish his
or her work.
Some of these steps can be eliminated by avoiding probate through joint
ownership or trusts. But whoever is left in charge still has to pay all debts,
file tax returns, and distribute the property to the rightful heirs. You can
make it easier for your heirs by keeping good records of your assets and
liabilities. This will shorten the process and reduce the legal bill
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