Estate Administration Services
If you have been designated to serve as executor, a close friend or relative considered you to be a trustworthy person, and capable of carrying out the provisions of his or her will. Your work will include collecting the assets, paying debts, filing several tax returns, and making timely distributions to the estate's beneficiaries.
By working with the attorneys at Gerhard & Gerhard, P.C., you will benefit from over twenty years of experience administering estates. Our firm will make your job easier and help you avoid costly mistakes that could otherwise subject you to personal liability. We will help you meet your fiduciary duties, file the necessary tax returns, and properly account to the estate beneficiaries.
The executor is in a position of responsibility and is ultimately accountable to the estate's beneficiaries and creditors. If no will exists, or if the named executor is unavailable, then an estate administrator, normally a close family member, will be appointed by the Register of Wills in accordance with Pennsylvania law.
The executor or administrator of the estate is entitled to reasonable compensation for taking on this role. Some executors will decline compensation, but it really is a job that takes significant time. If you are thinking of waiving compensation, you may wish to wait until the end of the estate administration before making that decision.
We see to it that the Pennsylvania inheritance tax return, estate notices, and other estate paperwork are prepared efficiently so that distributions can be made as quickly as possible. Legal fees will be reasonable, and disclosed up front in writing. We have flexible fee arrangements and can help on a fixed fee or hourly basis.
Our goal is to make this challenging job manageable. We will take as much of the paperwork off your to-do list as possible so that the estate administration does not become overwhelming.
Initially we ask our executors to gather all unpaid bills and current financial statements, together with copies of deeds for any real estate. It is also important to determine whether a safe deposit box exists so that it can be searched for a will. Valuable personal property should be inventoried, photographed, and safeguarded pending distribution.
If the estate is potentially insolvent, it is important not to pay creditors until all debts have been identified. If there are insufficient assets to pay all creditors in full, then Pennsylvania law has a "priority statute" that governs which creditors are paid in full, and which are partially paid. It is a mistake to pay creditors out of the statutory priority if the estate is insolvent. An executor can be surcharged (held personally liable) if creditors are paid out of order in an insolvent estate.
Income Tax Returns
One important step in the process is evaluating tax matters. Have required minimum distributions been made from retirement accounts? Do final personal income tax returns need to be prepared? Sometimes a decedent's taxable income is very low, especially if the death occurred in the beginning of the year. In some cases a federal income tax return may not be required. A final Pennsylvania income tax return normally needs to be filed.
The estate is its own taxable entity, is assigned its own tax identification number by the Internal Revenue Services, and files its own tax returns. These are known as fiduciary income tax returns and may be filed on a calendar year basis or on a fiscal year. The selection of a calendar tax year versus a fiscal tax year for the estate has consequence. Making the right choice can save taxes and minimize administrative costs.
Pennsylvania Inheritance Tax
Our office will prepare the Pennsylvania inheritance tax return. This death tax must be paid by the estate within nine months of death in order to avoid penalties and interest. A discount of 5% is deducted from the tax due to the extent the inheritance tax is paid within three months of death. Given today's low interest rates, it is normally advisable to make this advance payment if sufficient liquid assets exist. The current rates for Pennsylvania inheritance tax are as follows:
•The tax rate for transfers to lineal heirs (father, mother, child, stepchild, or their spouses) is 4.5%.
•The tax rate for transfers to a spouse is zero.
•The tax rate for transfers from a child age 21 or younger to a natural parent, an adoptive parent or a stepparent is zero.
•The tax rate for transfers from a decedent to a sibling is 12 %.
•The tax rate for transfers to all other collateral beneficiaries (nephews, nieces, cousins, friends) is 15 %.
•Bequests to charitable entities are exempt from Pennsylvania inheritance tax.
Accounting to Beneficiaries
Beneficiaries are entitled to know what assets were in the estate, what bills were paid, and what balance remains for distribution. In some estates you will need to file a formal account and explain your actions in court. In most cases, however, the estate can be settled amicably by way of a "family settlement agreement" which accompanies a schedule of distribution. Our office will prepare this paperwork for the beneficiaries to sign which releases you from liability. If beneficiaries do not sign the family settlement agreement then we can file a formal accounting with the court.
Estate and Trust Administration
We help executors and trustees avoid mistakes and potential liability. We’ll help you collect and value the assets, deal with creditors, prepare the tax returns, and facilitate timely distribution to the beneficiaries …
Form 1310: Statement of Person Claiming Tax Refund Due to a Deceased Taxpayer; Do It Right or Risk Major Delays
Filing a decedent’s final federal income tax return without including Form 1310 and supporting documentation will result in major delays in receiving an income tax refund that is due.