Probate & Estate administration is the process of managing and distributing a person’s property (the “estate”) after his/her death. If the decedent had a Will, the process is known as a “probate proceeding.” Under this scenario, the Surrogate’s Court must deem the Will valid. Validity is determined by the Court by reviewing whether the Will was executed properly as required by law, and by ensuring that everyone who would have inherited if the decedent had no Will was properly notified of the probate proceeding and received a copy of the Will and did not object to having the Will be admitted to probate. After the Will is admitted to probate, the decedent’s property is passed to legatees (the people named in the Will). The entire process is supervised by the Surrogates Court and usually takes about a year to complete.
If the decedent had no Will, the process is known as an “administration proceeding”. Under this scenario, the Surrogates Court will oversee the distribution of the decedent’s property to the interested parties who are entitled to receive the decedent’s property pursuant to New York State’s laws of intestacy. Interested parties under New York State’s laws of intestacy are the decedent’s’ spouse, children, parents, siblings, nieces and nephews, etc. depending on who survived the decedent. This process usually requires the Court-appointed Administrator to obtain a surety bond and pay the premium for the bond and provide a family tree identifying living heirs.
The responsibility of distributing assets to the correct people ultimately falls on whoever was appointed executor (as identified in the decedent’s Will) or administrator (usually the person bringing the petition in an administration proceeding).
The executor or administrator is responsible to: first, secure the tangible personal property. This means anything you can touch, such as silverware, dishes, furniture, jewelry or artwork. You will need to determine accurate values of each piece of personal property, which may require appraisals, and then distribute the personal property as the decedent directed or as the laws of intestacy direct. If personal property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the decedent may have made during life, which will not be part of his or her estate.
Second, Social Security should be notified within a month of death. If checks are issued to the decedent by the Social Security Administration following death, those checks will probably need to be returned to the Social Security Administration. Immediately thereafter, the executor or administrator should notify the decedent’s pension company, if the decedent had a pension.
Third, when the grieving process is over, meet with an attorney to review the steps necessary to administer the decedent’s estate. Bring as much information as possible about the decedent’s finances, real property holdings, taxes and debts. Don’t worry about first putting the papers in order; the lawyer will have experience in organizing and understanding confusing financial statements.
Other steps that need to be taken may include:
Filing the original Will, if one exists. The executor named in the Will must file the original Will and petition at the Surrogates Court and pay the appropriate Court filing fees in order to be appointed executor.
Marshaling, or collecting, the assets. This means that you have to find out everything the decedent owned because you will need to file a list, known as an “Inventory of Assets,” with the Surrogates Court nine months after getting appointed as executor or administrator. It’s generally best to consolidate all the estate funds to the extent possible into one estate account. Bills and bequests should be paid from a single estate checking account, one you establish as directed by your attorney, so that you can keep track of all expenditures.
Paying bills and taxes. If a state or federal estate tax return is needed it must be filed within nine months of the decedent’s date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply.
Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends on those assets, an income tax return for the estate.
Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which is seven months from the date the letters are issued by the Surrogates Court. But once the executor or administrator understands the estate and the likely claims, he or she can distribute most of the assets, while retaining a reserve for unanticipated claims and the costs of closing out the estate.
Filing an Inventory of Assets. The executor or administrator must file an Inventory of Assets with the Surrogates Court listing all property that was associated with the decedent whether it went through the Court proceeding or outside the Court proceeding. Before an executor or an administrator releases assets to beneficiaries, he may need to file an informal or a formal accounting of estate assets depending on the circumstances. Whether an accounting is necessary or not, an executor or an administrator should receive a signed Release and Receipt from each beneficiary, releasing him from his duties as the fiduciary of the estate.
How Do You Avoid Probate or Administration?
When the Surrogates Court has to get involved to administer a decedent’s estate, there will be a loss of time, a loss of privacy, a loss of control over the outcome and attorney fees and Court filing fees. Most of the steps mentioned above can be eliminated by avoiding the probate and administration proceedings all together. This can be done by having joint ownership or beneficiary designations on all assets you own or with the use of trusts, particularly for your real property if you own it alone. But, whoever is left in charge of the decedent’s estate still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and reduce the legal bill.