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Elder Law and Estate Planning Blog - Lancaster, PA

Friday, July 6, 2012

Mistakes of an Executor

Here are the 8 most common mistakes executors make when administering an estate.  There are oftentimes other mistakes made as well, so you should seek legal advice to ensure that all matters are handled.

1.    Probating the Wrong Documents.  When most executors hear the word “probate” they think of the long, difficult, expensive process of administering an estate and want to avoid it.  But, in Pennsylvania, that is mistake number one!  Pennsylvania’s probate process is not nearly as bad as most states and is in fact fairly easy, simple, and straight forward.  When someone ways they are going to probate a will, it means that you are going to the Register of Wills and someone there will verify that the will is authentic and that you are indeed the executor.  Then, as executor, you will take an oath promising to protect and distribute the estates assets.  There will be a small probate fee, but not nearly as large as other states.
    One of the first duties an Executor must do is to make sure that you have the right documents.  These are the most recent documents, so check the safe deposit box and with the lawyer who drafted the documents at the very least to make sure there aren’t more recent documents!

2.    Distributing early without protection from liability for that distribution.  As Executor, you are personally liable for the estate and distributions.  When executors make distributions before everything else is done, the executor is personally at risk (and these distributions are known as “at risk distributions”).  This does not mean that you cannot give some money out before paying creditors and anyone that can assert a claim or the estate assets, it just means that you better make sure that you can get the money back if there has been a miscalculation!

3.    Failing to comply with probate requirements.  In Pennsylvania, like we previously mentioned, the probate requirements aren’t too strict, however there are a few things that must be done.  Once sworn in as Executor, Pennsylvania requires that everyone named in the will is at least notified that it is in probate.  Once everyone is notified, you must notify the court by filing a certification.  If you are using an attorney to help administer an estate, they will do it for you and make sure it is done correctly.  Additionally, if someone has been disinherited under a will (for example a child), they must receive notice.  People do have the right to challenge the will, so Pennsylvania law requires that everyone who is supposed to know about this does know about the will.

4.    Failure to get discount for early inheritance tax payment.  Pennsylvania gives a discount for paying the inheritance tax within 3 months, rather than waiting 9 months when the inheritance tax is due.  But just because there is this discount doesn’t mean that you should rush to pay the inheritance tax.  Sometimes, say if you’ve got a lot of cash, it makes sense to pay the inheritance early and receive the discount.  In other situations, you may be earning more than the value of the discount with the money in another investment form.  Getting the advice of an estate administration attorney will help you with this decision.

5.    Forgetting to advertise the estate.  The law requires that the naming of the executor and the creation of the estate be advertised once a week for three weeks in a paper of general circulation and in the legal newspaper of the county of the decedent’s death.  When working with a law firm like ours, this will be handled by the attorney.  This is so that if debts were owed, creditors can come forward and make their claim on the estate.  In Pennsylvania, there is a 4 to 6 year statute of limitations, meaning 3 years after the estate administration is done, a creditor could have a valid claim, but had you advertised, the creditor could have known beforehand.  Additionally, advertising the estate cuts off claims after one year.

6.    Getting help too late.  Probate and estate administration can be a complicated process and is not as simple a job as it seems.  Those who have been executors know that it can be very time consuming and difficult.  Getting both legal and accounting help can make the job less time consuming, less difficult, and less emotionally draining as well as limiting your liability exposure.  Let someone who has been through the process many times before help you through it.  If a loved one just died and you need help with estate administration, our office can help.

7.    Not meeting tax deadlines.  Within 9 months you must file a PA inheritance tax return.  In some cases, you must also file a Federal estate tax return.  They must be filed timely, or you will get in trouble!  Generally, these returns look simple, but there are many strategic issues and you have to make certain elections that can create a bit of confusion.  Equally important in when you file them is how you file them.  You want your returns prepared and filed professionally because professionals really know what they’re doing.  They can help save you because they know the red flags, the things to avoid, the documents to attach.

8.    Failing to conclude the estate.  Once executors get to the end of an estate, oftentimes they just distribute the money without ever formally closing the estate.  Before distributing assets, you can go to a court and get the okay from a judge, or if you want to skip that piece of the probate process and your family is all in agreement, you can form a family settlement.  This gives everyone records of the estate administration so that they know where assets went and how much expenses were, so that the family can agree on these and not hold the executor liable for any mistakes.  By documenting everything among family members, if later debt pops up, everybody agrees to give the money back and the executor has managed their liability.  This must be prepared by an attorney and is a very powerful tool in protecting the executor’s liability.

These mistakes are common in the administration of an estate, so the best advice we can give you is to seek legal counsel to help you through the process.

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