Probate is the process by which a deceased person’s property, known as the “estate,” is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the Surrogate’s Court, usually takes about nine to twelve month. However, substantial distributions from the estate may be able to be made in the interim.
The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple’s finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can’t be set aside. Finally, the estate itself may be in disarray or scattered among many accounts, which is not unusual with a generation that saw banks collapse during the Depression.
Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor in the deceased family member’s will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.
First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If 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 deceased may have made during life, which will not be part of his or her estate.
Second, take your time. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without adverse repercussions. It’s more important that you and your family have time to grieve. Financial matters can wait a short time. One exception is that the Social Security Administration should be notified within a month of death. If checks are issued following death, you will need to return those funds or they may be directly withdrawn from a direct deposit bank account. For more on Social Security’s death procedures, click here.
When you’re ready, but not a day sooner, meet with an attorney to review the steps necessary to administer the deceased’s estate. Bring as much information as possible about finances, taxes and debts. Don’t worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements.
The exact rules of estate administration should be discussed with your attorney. In general, expect the following process:
1. Filing the will and petition at Surrogate’s Court in order to be appointed executor. In the absence of a will, heirs must petition the court to be appointed “administrator” of the estate.
2. Marshaling, or collecting, the assets. This means that you have to find out everything the deceased owned. One easy step is to file a change of address form with the United States Postal Service. You can complete a form at the local post office or complete the form online.
You need to file a list, known as an “inventory,” with the Surrogate’s Court. It’s generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures.
3. Paying bills and taxes. If an estate tax return is needed—generally if the estate exceeds $1 million in value—it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due.
4. 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, an income tax return for the estate. If the estate does earn income during the administration process, your attorney will have to obtain for the estate its own tax identification number in order to keep track of such earnings.
5. 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 in New York is seven months from the date of issue of letters of appointment. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.
6. Final account. The executor must prepare an accounting listing all principal assets, income to the estate since the date of death and all expenses and estate distributions. If all beneficiaries approve the accounting, no further judicial process is necessary. However, if a beneficiary does not approve, a proceeding must be commenced seeking judicial approval of the accounting. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.
Some of these steps can be eliminated by avoiding probate through joint ownership or trusts. But whoever is left in charge 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.
For more information on the duties of an executor, click here.