Updated: Dec 15, 2021
Is probate something that should be avoided?
In Pennsylvania, the court-supervised process to determine the deceased person’s assets, take care of their debts, and make distributions to beneficiaries is called “Probate.” Probate allows some very important things to take place making the administration of a deceased person’s estate more orderly. The process begins with validating the Will, notifying potential beneficiaries of the death, and appointing someone (called an “Executor” or “Administrator”) who has authority to collect and sell assets, pay creditors, pay inheritance taxes and distribute assets to beneficiaries. The court is not actively involved in the process unless someone with an interest in the estate asks the court to get involved. Some examples of the court’s involvement include giving the Executor authority to sell assets, providing oversight to Executors or Administrators who are performing their duties with diligence or in accordance with applicable law, and reviewing accountings of the administration of the estate.
Some believe that probate is expensive or time-consuming. Neither of these are necessarily true. The filing fees for probate are relatively low in comparison to other states. The length of the probate process is mostly determined by the diligence of the Executor and the ease by which the assets in the estate can be liquidated and distributed.
My family member just passed away; is probate necessary?
Probate is not always necessary. The types and titling of a deceased person’s assets dictate whether probate is necessary. Assets owned individually by the deceased person go through probate. Examples of these assets include a residence, rental properties, bank and investment accounts, individually owned stocks, and small businesses. Assets that do not need to go through probate include retirement accounts (such as IRAs or 401(k)s) and life insurance policies that list a beneficiary, do not go through the probate process. Property held in a living trust or funds in a payable-on-death (POD) bank account also transfer without the need of probate. However, if the deceased person owns property with someone else with no right of survivorship, probate will be necessary.
Does having a Will avoid Probate?
Having (or not having) a Will does not determine whether probate is necessary. The types of assets that the deceased person owns and how they are owned or titled is the factor that has the most influence on whether probate is necessary.
Does Probate increase inheritance taxes?
Pennsylvania inheritance tax is technically a tax on the beneficiary’s right to receive a deceased person’s property. It is assessed on most assets, regardless of whether probate is necessary or not. It is assessed against assets that pass pursuant to a Will and the law of intestate succession. Tax is also due on assets that pass by virtue of a beneficiary designation on an account. The amount of tax a beneficiary pays depends on two things: 1) the value of the property they receive and their relationship to the deceased person. Pennsylvania inheritance tax has four rates: 0% on assets passing to a surviving spouse, 4.5% to children and grandchildren. 12% to siblings and 15% to everyone else.
Probate can reduce the amount of inheritance tax paid. This is because the probate process usually includes filing an inheritance tax return that lists all of a deceased person’s assets (whether going through probate or not). The Executor will also include the deceased person’s debts and other expenses on the return that serve as deductions, thereby reducing the amount of tax paid. If an inheritance tax return is not filed, each beneficiary who receives assets will be sent an invoice calculating the amount of tax due. This invoice is misleading because many beneficiaries do not understand what deductions are available to reduce the tax bill and pay too much in taxes.
How long does the Probate process last?
The length of time of the probate process depends on the assets, the capabilities of the Executor or Administrator, and whether there are any disputes. Also, the time can vary based on whether there is a Will, whether the beneficiaries can be easily located. Some assets, such as bank and investment accounts, are relatively simple and easy to administer. Others, such as real estate, small business interests, and certain stocks, are more time-consuming. It takes a good deal of time to prepare real estate for sale, market, and sell it. Small businesses are a particular challenge to sell, especially if the deceased owner did not have a solid succession plan in place.
Administering an estate can be confusing and time-consuming for someone who has no experience with it. Some Executors choose to try to handle things on their own (without the assistance of an experienced estate administration attorney or accountant) and consequently struggle to accomplish all of the tasks quickly and efficiently. There’s an inevitable “learning curve” that they must undergo and that always causes things to be delayed. Sometimes Executors are unmotivated to administer estates for personal reasons. This can lead to significant dissatisfaction and create disputes and dissension with beneficiaries.
Disputes with the Executor or among beneficiaries can significantly delay the completion of probate. Family members sometimes hold grudges from long ago hurt feelings and those have a tendency to come out as disputes when a parent’s estate is being administered. Arguments over unwritten promises by a parent or loans or advances received by one family member by a parent are not uncommon. Beneficiaries sometimes feel that an Executor is not treating everyone fairly or is not performing their duties as quickly or as well as expected. If the court is asked to intervene to resolve disputes, the litigation process will delay the completion of the probate.
Our probate attorneys help Executors and Administrators close and settle estates as efficiently and quickly as possible. Because we have years of experience with estate matters, clients seek out our services throughout Pennsylvania. Wherever your location, our probate lawyers make the process easy for you.