Often times we are asked, “What is probate?” “What happens to my property after I pass away?” “If I make a last will and testament then everything is handled, right?” An attorney’s favorite answer is, “It all depends.” The answers to those questions will be addressed in this article.
If someone passes away and that person owns assets of which they are the sole owner and there is not a beneficiary named on the assets, then those assets are probate property. Except for some very limited circumstances, in order to access and manage probate property, certain forms must be filed at the Register of Wills at the county courthouse, including the person’s last will and testament. The forms would have to be filed at the courthouse in the county in which the deceased person, also known as the “decedent,” was a resident. In the event the decedent does not have a last will and testament, then the Pennsylvania rules of intestacy would control who the person in charge of the estate would be (a.k.a. Administrator/Administratrix) and who would be the beneficiaries. Whether or not the decedent had a will, the probate process always begins at the Register of Wills office. Pennsylvania does not require your last will and testament to be filed at the courthouse until you have passed away and only if you have probate property. Once the probate process is started there are certain deadlines that must be met for notices, tax payments, and filings. For example, the inheritance tax return and federal estate tax return are due nine months from the date of the death. However, a five percent discount is allowed on the inheritance tax paid, as long as it is paid within three months of the date of death.
Even if you do not have any probate property when you pass away, inheritance taxes may still be owed. For instance, when you pass away if your property consisted of real estate and a checking account that you owned jointly with right of survivorship with your child, then those items would pass to the surviving owner, the child, without probate; however, the child would still have to pay inheritance tax at 4.5% on half of each of those assets because he or she is inheriting the parent’s ownership interest. If the child was added as joint owner less than one year prior to the person passing away, then the child would have to pay inheritance tax on the whole amount.
There are a lot of intricacies in the law that need to be managed upon your death and in administering the estate. As if probate and inheritance taxes are not enough for you to consider, if the decedent received Medicaid when they were age 55 or older, then you may also have to manage an estate recovery claim by the Pennsylvania Department of Human Services (DHS). Estate recovery is a program that was established under federal law that requires DHS to recover the Medical Assistance costs from the estates of individuals who have died. Repayment is required for the amount the state paid, even if the individuals paid part of the bill themselves or through insurance. If you are the Personal Representative of the estate, it is your responsibility to give notice to the Department requesting a statement of claim, which is an accounting of all of the Medical Assistance payments made for the decedent for certain services. If there is a chance that there may not be enough money in the estate to pay all of the debts, then you can’t simply pay bills as they come in. There is a specific order of which creditors get paid first.
Some estates are simple and can be administered without the help of a legal professional; however, more often than not, there are issues lurking in the background that you do not even know that you do not know! Make sure you are protected from liability when administering an estate and get professional help to assist you.