Inventory of the Deceased’s Estate
All estate planning documents and other important papers of the deceased must be identified before appointing a personal representative or probating a will by the court or before a successor trustee takes over the management of the trust.
The estate planning documents of the deceased include the last will and testament, funeral instructions, cremation or burial wishes, or a revocable living trust.
Important papers include bank statements, stock and bond certificates, life insurance documents, titles to vehicles and boats, and deeds. The request may relate to other information regarding the deceased’s debts, including utility bills, credit cards, mortgages, personal loans, medical bills, and funeral expenses.
The court then officially appoints the executor if court action is necessary and when the will is submitted to the court. A petition to open probate must also be filed if the deceased left no will. The successor trustee can now accept the appointment without the involvement of the court if the deceased left a living trust.
Note: It is customary for there to be a delay of up to two weeks from the date of death until probate is officially opened in some states. For example, the court in New Jersey cannot accept a will for probate until 10 days have passed from the date of death. Anyone wishing to contest the will can do so during this time.
Valuation of the Deceased’s Assets
The value of the deceased’s assets must be determined as of the date of death. Most state probate courts require the estate to submit a comprehensive list of all property owned by the deceased along with the corresponding estimated values.
This information is also important for beneficiaries. Any capital gains tax will be calculated using this date-of-death value if a beneficiary decides to sell the inherited assets.
This is referred to as the step-up in basis, which is beneficial. Otherwise, any capital gains tax would be based on the difference between the sale price and what the deceased paid for the asset, which could be significantly higher.
The total value of the deceased’s assets also determines whether there will be any estate taxes owed at the state and/or federal level after deducting the debts owed by the deceased and certain gifts such as those made to spouses or charitable organizations and the costs of estate administration.
Paying Final Bills of the Deceased
The final bills of the deceased, creditors, and ongoing administration expenses must be paid before closing the probate of the estate or trust and distributing the remaining assets to the beneficiaries. This occurs after determining the value of the deceased’s assets and, in the case of probate, after presenting the inventory to the court.
The executors are required to notify all potential creditors of the deceased, whether they know them or not. This is typically accomplished through a newspaper announcement, informing creditors of the death and directing them on how to file claims for inheritance due to them.
Note: This published announcement is usually accompanied by a written notice directed to known creditors.
Creditors will then have a specified period to file claims, depending on state law, but it can coincide with the inventory period in some states.
The executor has the right to determine whether the claims are valid and whether they should be paid. Rejecting claims can lead to many court hearings where the judge will ultimately decide, which can take a long time. For example, in Washington, creditors have a 30-day window to file a complaint against a rejected claim, and this can slow down the estate closing process.
Note: The final bills of the deceased are likely to include mobile phone bills, credit card bills, medical bills, as well as estate or trust administration expenses, such as storage fees, utility bills, and attorney fees. Any other mortgages or secured debts must also be resolved.
Preparation
Tax Returns and Applicable Taxes
The executor of the court order or backup trustee must also file all necessary federal and state tax returns for the estate, estate tax returns, the deceased’s final income tax returns, and income tax returns for the estate or trust.
Of course, any taxes owed must be paid on time to avoid interest and penalties. When the estate owes property taxes, it usually cannot be closed until written approval is received from the Internal Revenue Service or the state tax authority.
Distribution of Remaining Assets to Beneficiaries
Finally, the executor or backup trustee will distribute the estate to the beneficiaries. This is the final step, as executors and trustees can be personally liable for unpaid deceased bills, administrative expenses, and all unpaid taxes if they fail to attend to all prior steps first.
When Can You Expect Your Inheritance?
The length of time the probate process takes depends on many factors, including the types of assets the deceased owned, the value of those assets, whether the estate is subject to state and/or federal taxes, the number of beneficiaries involved, and the skills and diligence of the executor or backup trustee.
A simple estate or trust can be settled within a few months, while a large estate or trust can take a year or more to close.
Disclaimer: This article is not intended as legal advice. Before making any significant decisions regarding its contents, you should consider seeking advice from a licensed attorney specialized in estate law in your specific state.
Frequently Asked Questions (FAQs)
Who inherits money if there is no will?
If you die without a will, your assets will be divided according to the laws of the state you live in. Most places consider your spouse or children to be your legal heirs if you do not have a will. If you do not have a living spouse or children, your closest relatives might be your legal heirs, such as your grandchildren, parents, siblings, or grandparents. If you have no legal heirs, the money will revert to the state.
What is the estate tax rate?
Whether you will pay an estate tax depends on where you live. Six states – Nebraska, Iowa, Kentucky, Pennsylvania, New Jersey, and Maryland – have estate taxes ranging from 0% to 18%, depending on the size of the estate. There is no federal estate tax, but the federal estate tax ranges from 18% to 40% on estates valued over $12.06 million after credits and deductions.
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Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we fact-check and ensure the accuracy, reliability, and credibility of our content.
Justia. “NJ Rev Stat § 3B:3-22, Time Limits for Will Administration; Submission of Claims.”
IRS. “Publication 559, Survivors, Executors, and Administrators,” pages 3-6, 10-12, 16-17.
American Bar Association. “Guidelines for Individual Executors and Trustees.”
Cornell Law School, Legal Information Institute. “Creditor Claims.”
Washington State Legislature. “Claims Against the Deceased – Time Limits.”
IRS. “Deceased Executors – Understanding Your General Duties as an Estate Administrator.”
Tax Foundation. “Does Your State Have an Inheritance or Estate Tax?”
IRS. “Estate Tax.”
Source: https://www.thebalancemoney.com/when-will-you-get-your-inheritance-3504965
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