When is it necessary to administer an estate?

If an individual passes away leaving assets in their name alone, it is often necessary to open an estate so that the executor can gain access to those assets. Those assets must then be used to pay the bills of the decedent in a specific order proscribed by law. Once all debts are paid, the remaining assets go to the decedent’s beneficiaries, subject to the payment of Pennsylvania inheritance tax. If the ‘probate’ estate is less than $50K (a small estate), there is a streamlined process to administer the same. The important thing to remember is that if you inherit something from a PA resident that passed away (other than your spouse), you probably owe inheritance tax.

When is it not necessary to administer an estate?

For many married couples, no estate administration is necessary upon the death of the first spouse because: (1) There is no inheritance tax for assets going to the surviving spouse; (2) all their assets are held jointly and by operation of law those assets automatically pass to the surviving spouse; and/or (3) the spouse was the named beneficiary of any designated assets.

It can be necessary to probate the Will of a husband or wife that has passed away if they held assets in their name alone which cannot be accessed otherwise. Thankfully, if the Will leaves everything to the spouse, no inheritance tax is due, even though some administration is required.

Why does this system exist?

Our probate or estate administration system has been built up for two primary purposes:

The first is to create an orderly public process wherein all that an individual has accumulated over a lifetime is orderly transferred to the beneficiaries named in their Will or Trust. If an individual dies without a Will or Trust, their estate goes to their Intestate Heirs, which in PA is family in an order predetermined by the state. It comes as great relief to many to discover that our state is not the beneficiary of anyone’s estate, unless someone dies leaving no family whatsoever.

The second is that death is a taxable event. It is necessary to accurately assess the net value of the assets of a decedent’s estate because when a state resident (domiciled here) dies, those funds, namely someone’s inheritance, are taxable. It is just one of many sources of revenue our state uses to pay its bills. The rate of tax paid is based on the beneficiaries’ relationship to the individual that died a resident of Pennsylvania. The rates are: (1) 0% for spouses and charities; (2) 4.5% for “lineal descendants,” namely grandparents, parents, children and grandchildren; (3) 12% for brothers & sisters; and (4) 15% for everyone else. There are some inheritance tax exceptions for small businesses, family farms, children under 21, etc.

How much will your office charge to help administer my loved one’s estate?

It depends on the size and complexity of the estate, whether the beneficiaries are cooperating or fighting, if litigation is involved, and if other unexpected issues arise. For the most part, we charge a flat rate depending on if the estate is for a surviving spouse, for an individual that owns real estate that is to be sold, or not, plus a small percentage of any assets in excess of $100,000. We will inform you exactly what our total fee would be to administer your loved one’s estate so that you can call other lawyers or law firms (just like you would do with a electrician, plumber, or roofer) to ask them if they will give you an exact quote for their similar services. In any event, our fee is clear and reasonable. Rich is more than happy to meet with families facing any issues so that he can answer any questions they may have.