The process of settling an estate involves naming a personal representative, collecting estate assets, filling appropriate forms with the Register of Wills, notifying heirs, providing a public notice, paying all debts and taxes, and distributing the remaining assets to heirs named in the will or under the laws of intestacy if there is no will.
This article will provide a brief overview of the necessary steps when settling an estate in Pennsylvania.
Locate important documents:
Assets owned jointly with another person usually skip probate, and can be passed to the co-owner. Examples of likely jointly owned assets may include bank accounts, brokerage accounts, and real estate. Also, trust assets pass outside of probate.
Additionally, assets that have beneficiary designations may skip the probate process. Assets that typically have beneficiary designations are retirement accounts, annuities, and life insurance policies.
Be sure to look for Transfer on Death (TOD) and Payable on Death (POD) account designations as well. TOD and POD accounts also bypass probate and go directly to the named beneficiaries.
Small sums of cash up to $10,000 can be distributed from bank accounts to the surviving spouse or family members by providing a copy of the death certificate and receipt of paid funeral expenses.
Up to $10,000 in wages may also be distributed to the employee’s surviving spouse or family members.
Life insurance proceeds of $11,000 or less may also be paid out to the decedent’s surviving spouse or family members if the executor of the estate does not stake a claim within 60 days of the decedent’s death.
If an estate has less than $50,000 in assets (excluding real estate, assets used to pay the decedent’s funeral expenses, and the assets that skip probate) the executor may file a request with the local probate court.
If the court allows, the executor may distribute estate assets without following the formal probate process.
If the estate does not qualify for the above simplified probate, the formal probate process is used.
If there is a will, the listed executor must file the will with the Register of Wills in the decedent’s local probate court. At the same time, the executor will file a Petition for Probate form.
A filing fee is also required and is determined by the size of the estate and by county. The Register of Wills will issue a Letters of Testamentary to give the listed executor the authority to carry out the estate settlement process. These steps officially open the probate process.
The will may be “self-proving.” Self-proving wills included notarized statements signed by witnesses that watched the decedent sign the will. If the will is not self-proving, the executor must provide sworn statements from the witnesses.
If there is no will, an interested party will file a Petition for Probate form. A filing fee is also required and is determined by the size of the estate and by county. The Register of Wills will issue a Letters of Administration to name an administrator.
The Letters of Administration are granted in a specific order starting with the surviving spouse, then children, other family members, creditors, and finally people deemed “fit” to serve as administrator.
After appointment, the executor or administrator, commonly referred to as the personal representative must give notice that probate is beginning to heirs, beneficiaries, and the public. A legal notice must be published in a local newspaper and written notice must be provided to the heirs.
The personal representative then takes inventory of the estate, which is filed with the probate court, decides which remaining estate property to sell, and pays debts and taxes. Pennsylvania is one of six states to impose inheritance taxes.
Inheritance taxes are due on many assets, even if not included in the probate process. These assets include retirement accounts, annuities, TOD and POD accounts. Inheritance tax is however not levied against life insurance policies in Pennsylvania.
Filing federal estate tax forms may be needed or desired. Federal estate taxes are levied on estates larger than $12.06 million dollars in 2022, meaning that the first $12.06 million dollars of an estate are exempt from federal estate taxes. The following table is used for amounts over the $12.06 million dollar exemption.
|Tax rate||Taxable amount||Tax owed|
the amount over $10,000
the amount over $20,000
the amount over $40,000
the amount over $60,000
the amount over $80,000
the amount over $100,000
the amount over $150,000
the amount over $250,000
the amount over $500,000
the amount over $750,000
the amount over $1,000,000
It is good practice to file the final accounting with the probate court to resolve any claims against the estate. An estate settlement agreement may be used instead of a final accounting. After the personal representative pays all debts and taxes, estate assets will be distributed to beneficiaries stated in the will, or by laws of intestacy if there is no will. They must also prepare the final accounting. The final accounting shows assets contained within the estate, how the personal representative managed assets, and how assets were distributed to beneficiaries.
Settling an estate in Pennsylvania can be a straightforward process with the right preparation and materials. Understanding what probate is and which assets can be omitted from the probate process will help direct your estate planning and ease the process of settling your estate later. Whether you're just starting your financial planning journey or putting your affairs in order, a financial advisor can help guide you so that your estate settlement will be clear. Ready to create a personalized plan? Contact Allegheny Financial Group to get started.
This article is meant to give a brief overview of the steps involved in settling an estate in PA and does not constitute estate planning advice.
Please consult your estate attorney regarding legal advice and a CERTIFIED FINANCIAL PLANNER™ professional for financial advice.
Author: Christopher T. Smith, CFP® | Financial Planner | Allegheny Financial Group
The information included herein was obtained from sources which we believe reliable. This report is being provided for informational purposes only. It does not represent any specific investment and is not intended to be an offer of sale of any kind. Past performance is not a guarantee of future results.
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