PROBATE AND ESTATE ADMINISTRATION When a person dies and has a last will and testament, the term used to describe the process of settling the person’s estate is “probate”. The title assigned to the person responsible for handling a probate estate is “executor” or “executrix”. When a person dies without a last will and testament, the term used to describe the settlement process is “administration”. The title assigned to the person responsible for handling an estate administration is “administrator” or “administratrix”. In either case, there are several tasks that must be completed efficiently to ensure that an estate is properly distributed. The failure to settle an estate properly can not only increase the expenses payable out of the estate, but also trigger liability upon the person responsible for settling the estate.
For example, many people are not aware that New Jersey can impose an estate tax and/or an inheritance tax upon the deaths of people whose principal residence is in New Jersey. At the risk of oversimplification, the estate tax applies when the aggregate value of assets passing upon a person’s death exceeds $675,000. The inheritance tax will apply when assets pass to somebody other than a parent, spouse, child, stepchild, grandchild or charity. For example, assets that pass to brothers, sisters, nieces, nephews or friends are subject to the inheritance tax. In some instances, an estate can be subject to both the estate tax and the inheritance tax. The assets that are subject to such taxes include assets (a) that were owned jointly by the decedent and some other person and (b) that pass by right of survivorship, such as bank accounts, and that are controlled by beneficiary designations, such as IRAs, 401ks, annuities and life insurance policies. Even though such taxes are supposed to be paid out of estate assets, if the person responsible for settling the estate (the executor or administrator) does not provide for the preparation of estate and/or inheritance tax returns and the payment of estate or inheritance taxes, the executor or administrator will be personally liable for any taxes that remain unpaid.
Other aspects of the probate and administration processes that can shift personal liability to an executor or administrator, if performed inadequately, include (1) the payment or nonpayment of debts incurred by the decedent and the estate, (2) the management of assets by the executor or administrator between the date of death and final distribution of estate assets, and (3) poor communication with beneficiaries of the estate.
Service as executor or administrator does not have to be risky or scary. There are safe harbors for the performance each of the tasks necessary to settle an estate. It is lack of knowledge about the tasks that need to be completed and about how to complete the tasks properly that can subject an estate to unnecessary expenses and expose an executor or administrator to personal liability.
John J. Ross and his staff assist executors and administrators with the proper disposition of decedents’ estates. Mr. Ross explains the tasks that need to be completed and guides and assists executors and administrators in the performance of the tasks. The services that Mr. Ross and his staff perform include, but not limited to, preparing inheritance and estate tax returns, implementing procedures necessary to properly discharge debts, preparing accountings, and communicating with beneficiaries and other interested parties in order to avoid litigation or other challenges to the processing of the estate by the executor or administrator.