Estate Administration

estate administration

The most important thing to know about estate administration is that you want to avoid it in the first place! If you are planning your own estate in advance, there are a number of tools available to do this. These include such things as payable on death designations,  joint accounts, and trusts.

Even so, hundreds of New Hampshire estates have to go through administration every year. Most often this is because the person who died (the “decedent”) did not take advantage of the planning tools available.  Whatever the reason, it now falls on somebody to sort it out. The courts call that person the “executor” or “administrator” of the estate.

The Executor

If the decedent wrote a will, then the will almost always nominates who will be the executor. While the executor is usually a beneficiary, that is not always the case. Unless there is strong reason against it, the court will appoint the executor that the will nominated. If there is no will, or even sometimes if there is, sometimes there is an argument about who should be the executor. In that case, a judge will have to decide. But most often it is an uncontested, easy decision.

If There Is No Will

It is a common myth that if a person dies without a will, all assets go to the State. In fact, this is not true.  When there is no will, the law dictates a plan for who will get the assets.

Not All Assets Are the Same

Another subject that many people get confused about is which assets are part of the estate. They assume that the will controls all property. In fact, it is common that after a person dies some assets have to go through  through estate administration while others do not.

For example, suppose Skip is a widower with three adult daughters. He has one bank account that has most of his money in it. For whatever reason, he designated this account  “payable on death” to one daughter, Hayley. When Skip passes away, the bank will automatically distribute all of the money in this account to Hayley. It doesn’t matter that his will names all three daughters as equal beneficiaries.

Skip also has a much smaller bank account that does not have a “payable on death” designation. This other smaller account will have to go through the estate administration process and be divided equally among the daughters. But the larger account, while part of his overall estate, is not part of the “probate estate”. In effect, this meant that Hayley got most of the money, even though the will named all three daughters. We may never know if this was Skip’s true intent. You can see how these kinds of issues tear families apart.

Starting Estate Administration

Within 30 days, the executor should file the will with the court. After that, the judge will appoint an executor. The executor then must file a petition for estate administration form. This form, like all papers filed with the probate court, must be filed electronically online. On this form you must list a number things, including  a list of beneficiaries and a list living family members, whether they will inherit or not.

Another thing the form requires is an estimated value of the estate. The court uses this figure to set the bond that the executor must pay. A probate bond is a type of insurance that pays the beneficiaries in the event the executor is dishonest or negligent.

Paying Debt

The executor must pay off all of the estate’s debt.  Often this is pretty straightforward but sometimes it gets tricky. This is especially true if the person died owing more than they had in assets. In that case, the executor must follow strict rules about who gets paid first.

An estate must remain open for at least six months to allow any creditors a chance to make claims.

Inventory of Assets

Just as the executor must figure out what the decedent owed, he also must figure out what the decedent owns. The executor should list all of the decedent’s assets on an inventory form.

A More Simple Estate Administration Process

In certain situations, the executor can choose “waiver of full administration“. The law allows this when there is only one beneficiary to the estate, who is also the executor. The reasoning is that when there is only one beneficiary, it is unlikely that there will be disputes. When allowed, the executor does not have to file the list of assets. The executor also will not have to post a bond.

Taxes

Of course, even after you die you have to deal with the IRS. There are various types of taxes that the executor must consider. There is the final income tax return for the decedent. That involves taxes on what the decedent earned while still alive. Then there are income taxes the estate itself owes for earnings from the time the decedent died until the estate is closed (for example, dividends and interest). If the estate was very large then the executor needs to file an estate tax return and pay estate taxes. It almost always makes sense for the executor to hire an accountant to prepare the various returns involved.

Wrapping Up the Estate Administration

The executor must wait a minimum of six months before filing to close the estate. As a practical matter, it often takes much longer due to various issue that come up in sorting out the decedent’s affairs. If the estate can’t be closed in less than one year, the executor must file an annual inventory of assets.

If all of the beneficiaries agree, the executor can file for what is called Summary Administration. This is not quite as speedy or efficient as the Waiver of Administration, but it does allow the executor to wrap things up with less detailed accounting. Otherwise, the executor must file a full accounting. Once the court approves the final accounting, the executor can distribute funds to the beneficiaries and close the estate.

Hiring a Lawyer

Many non-lawyers are certainly capable of handling estate administration. It often makes sense, however to hire a lawyer to assist. This is especially true if the estate is complicated or has a lot of assets or debt. If you are serving as an executor, or recently had a loved one die and don’t know where to turn in sorting things out, contact the lawyers at Cohen & Winters to see if our team can help you during this difficult time.