When our law firm handles an Estate a common question from the family is when can the beneficiaries of the Estate receive their inheritance? A beneficiary is also known as an heir. While the amount will vary all Estates will have debts. While a deceased may not owe money to credit card companies, banks, or other lenders everyone will have expenses associated with their passing. This topic is discussed in my free book--Strong which is available on my website
The law requires that certain obligations (expenses) be paid before any other debts and the distribution of inheritances. In most cases these expenses rank as follows:
- Funeral expenses
- Administration expenses
- Taxes (federal and state)
- Expenses of last illness
- All other debts.
Funeral expenses come before any other because the law wants to show respect for the deceased regardless of what he or she may have owed in life or after death. While there are exceptions, such as evidence of extravagant funerals to avoid the payment of other debts, the law will not question a person’s funeral expenses. These expenses include not only the cost of the funeral directors service but also the cost of flowers, a funeral lunch, and practically anything else spent to memorialize the deceased within reason.
Administration expenses include the cost of opening the Estate at the Register of Wills Office in the county where the person resided (filing fees) as well as the cost of opening the Estate bank account, attorney’s fees, accounting fees, and any other expense associated with settling a person’s affairs.
The amount of taxes owed by the Estate are based on the value of it. In most situations an Estate will not owe federal taxes provided that its value does not exceed 5 Million dollars. Inheritance Taxes in Pennsylvania can range from 15% to 0% depending on the deceased’s relation to the beneficiary. All debts (inheritances are not debts) are deductions against a gross estate and therefore reduce the amount of taxes owed by the estate.
Expenses associated with the last illness are medical expenses but can also include the cost of professional care (nurses and custodial care). In many situations a deceased will spend a considerable amount of time in a hospital or receiving care prior to their passing and it’s important that the Estate’s executor gather all of these expenses.
If the executor fails to pay debts and there is evidence to show either negligence or intentionality, the executor could become personally liable for these expenses. While the law does not require the executor to actively seek out all creditors (anyone who is owed money) it does require the executor to act with due diligence when reviewing a person’s assets and liabilities. In addition, almost all states require that the executor advertise the estate in the newspaper to give creditors the opportunity to make claims against the Estate.
Estate administration is very important because of an executor’s potential personal liability in this matter. If you have questions about estate administration after a person’s passing you should always contact an attorney.
This is just one of the topics I discuss in my free book-Strong which is available in my free download section of the website