Friday, September 19, 2014

I'm a beneficiary under an estate. When will I receive my share?

When I probate an estate of a dearly departed, one of the first questions I am often asked is "When will I get my inheritance?"  Unfortunately, distributing the assets to the beneficiaries can take several months, and is the last thing the Personal Representative (PR) is likely to do. 
In the context of probating an estate, before the assets can be distributed to the beneficiaries, the PR has several tasks, including: 

1.      Due to the adoption in Massachusetts of the Uniform Probate Code, there are now two methods by which the appointment may occur.  These are known as “Formal” and “Informal” probate.  Generally, informal probate is appropriate if the decedent had fewer assets or assets consolidated into just a few places, and no real estate. This process is fairly streamlined.  The PR is granted the authority to manage and dispose of assets without any further formal court proceeding.  Formal Probate is generally necessary if the estate is of a higher value, or there are numerous separate assets, or if the estate includes real estate.  Formal Probate resembles the general probate laws under the old system.   Both forms of probate require submission of documents to the Probate Court, the payment of filing fees, and a certain amount of time before appointment is issued.

2.      Once the PR is appointed, the PR must gather information and locate paperwork reflecting of all of decedent’s assets, as well as any estate planning documents.  The PR must value each asset at its date of death value.  This is important for the beneficiaries, who receive a step-up in the tax basis of any asset when sold.  It is also important for purposes of determining estate tax liability, if any. 

3.      Next, the PR must notify the decedent’s creditors, primarily by publication, and then pay the decedent's final bills and ongoing administration expenses.  The PR must then file applicable tax returns and pay applicable taxes.  These may include a final income tax return, an estate income tax return, and estate tax returns if applicable, and pay any taxes due.  The PR is personally responsible for all unpaid bills, administrative expenses and/or taxes due, so the PR wants to be absolutely certain that all liabilities have been accounted for.

4.      Finally, after all of the above is accomplished, the PR may distribute the remainder to the beneficiaries.  The timing of distribution will depend on many factors, including the types of assets the decedent owned, the value of those assets, a determination of taxes and expenses due, how many beneficiaries are involved, whether the beneficiaries get along, and the skills and diligence of the PR is administering the estate. A simple estate or trust may be settled within a few months, while a complicated estate or trust may take one or more years to settle.

The above explanation addresses the steps to be taken in the context of filing a will for probate due to the Decedent’s ownership of probate assets. Probate assets consist of assets owned by the decedent, outright in individual name. Non-probate assets consist of (a) property held jointly with a right of survivorship, (b) assets for which a beneficiary is named, such as retirement funds or life insurance, and (c) assets held in trust.  While the concept of “avoiding probate” is somewhat overstated, assets held in trust are not subject to the probate process, are likely to be organized in advance, and areup to date on payment of liabilities.  For this reason, the creation and funding of a Revocable (Living) Trust may save a great deal of time at the death of the decedent.
I am available for more information or to work with clients to establish an efficient estate plan.