Estate planning is the process of getting your personal and financial affairs in order in the event you become mentally incapacitated or die. The basic legal document when you plan for your death is called a Last Will and Testament, which contains a written set of instructions to your family and loved ones as to how you want your estate to be distributed after your death.
What is a Last Will and Testament and how does it work?
A Last Will and Testament generally consists of four parts:
- Part one deals with how your final bills will be paid;
- Part two deals with how the cost of settling your estate and any estate taxes and/or inheritance taxes will be paid;
- Part three deals with who will get the balance of your estate, how they’ll get it, when they’ll get it and any gifts you wish to make from your estate.
- Part four deals with who will be in charge of overseeing the settling of your estate (the Personal Representative/Executor) and what powers they will have, and, if you have minor children, who will be responsible for raising the children (the Guardian);
What is Estate Administration?
Estate Administration is the process of managing the state of a person after death. It involves collecting all of the decedent’s assets, paying all of the debts, including taxes, and distributing the decedent’s assets to the heirs and beneficiaries of the estate.
What is Probate?
Probate is the process of proving that the decedent’s will is valid. The Personal Representative, or Executor, begins the process by filing a petition for probate at the Register of Wills Office in the county where the decedent died.
The Personal Representative, or Executor, is the person named in the Last Will and Testament to manage the Estate Administration process. The responsibilities include initiating the Estate Administration process, notifying all interested parties, managing assets, paying all of the estate’s debts and distributing the assets to the beneficiaries. In many cases the Personal Representative works closely with an attorney during the process.
Probate is not always necessary. If the decedent owned no probate assets upon death, it may not be necessary. Generally probate assets are titled in the decedent’s name alone. If the decedent owned only a joint banking account, and an IRA or life insurance policy with a designated beneficiaries, these are non-probate assets and do not have to go through probate.
Who Pays Your Estate’s Expenses?
In most cases, the personal Representative will not be personally liable for any estate expenses, including payment of taxes. However, he or she, is responsible for paying all the estate expenses from the assets of the estate. If there are not enough assets to pay all the estate expenses, Pennsylvania determines the priority of the expenses to be paid.
How is Your Administration of the Estate Completed?
The administration of your estate can be completed either formally or informally. Under the formal method, the personal Representative prepares and files with the court an accounting of the administration. Notice is given to all interested parties and they have the opportunity to appear before the court and object to the accounting. After the court issues its decree, the personal Representative distributes the assets to the beneficiaries. It’s important to know that this is not a speedy process and can take more than a year to complete.
Under the informal process method the Personal Representative prepares a Family Settlement Agreement and informal accounting. Once all the beneficiaries, and other interested parties, have signed the agreement, the personal Representative can distribute the assets and avoid the additional cost and delay of a formal accounting.
What Will Happen if You Die Before You Make a Will?
What will happen to your property if you don’t make a Last Will and Testament before you die?
All states, including Pennsylvania, have a legal process in place for determining who will inherit your property if you fail to make a valid will through the state’s “intestacy laws.”
What does it mean to have died “intestate?” This simply means that you have died without having made a valid Last Will and Testament. If this is the case, then the intestacy laws of Pennsylvania will determine who will inherit your property. While each state has different laws, they all follow the same general pattern – first your spouse and your children will inherit your property; if you don’t have a spouse or any children, then your parents will inherit your property; if your parents have predeceased you then your brothers and sisters will inherit your property; if not, then your property will go to your nieces and nephews.
It’s important to consider your estate plan earlier rather than later when you might not have the ability or capacity to prepare your Last Will and Testament. Since you can amend your will through a codicil or redraft the document, as long as you have legal capacity, preparation is important so your wishes are followed upon death.