What is probate in Pennsylvania?

EP2“You can’t take it with you,” goes the old saying.

So how does your property pass to your heirs when you die? One way is through the probate process. I find that many people have heard the term “probate” but not everyone has a clear understanding of what the term means.

This post will explain what probate is and how it works in Pennsylvania, where I practice law.

Various ways to pass ownership

The first thing to understand is that probate is only one of several way that ownership passes to someone else when you die.

If you own an asset titled jointly (with rights of survivorship), then that asset will pass to any surviving owner automatically upon your death. Some assets, particularly retirement accounts and life insurance, pass to others because you have designated them as beneficiaries. Financial institutions such as banks often allow depositors to title accounts “payable on death to,” “transfer on death to,” or “in trust for” a named beneficiary; accounts titled this way will be paid to the beneficiary after you’re gone.

Some people own property that is titled in the name of a trust that spells out how assets will be distributed and re-titled after death.

Pennsylvania law also provides procedures to obtain certain assets without opening a probate estate. These procedures apply to amounts on deposit at a bank or patient’s care account of $10,000 or less; wages, salary, or employee benefits of $5,000 or less; and life insurance payable to an estate of $11,000 or less. The procedures are described here.

But if you die owning property in your own name alone, that cannot pass to others by any of these methods, someone will probably have to open a probate estate to pass ownership to anyone else.

Probate process

Probate is the process by which those individually owned assets get re-titled. In most cases it also involves settling debts and paying taxes.

If the deceased left a valid will, the executor named in that document will appear at the local Register of Wills office to initiate the probate process with the filing of certain documents and the payment of any required fees. This is called opening a probate estate. (There are other names for an executor, including executrix (female) and personal representative. For simplicity, I will simply refer to the person in this role as the executor.)

The appointed executor will receive “short certificates.” A short certificate is a one-page document showing official proof that the person named as executor may act on behalf of the estate.

The executor then collects the assets of the estate, pays bills, pays taxes, and takes whatever other actions are necessary to make sure the estate is handled properly under state law. Once this process is complete (usually in about six to 18 months), the executor accounts for the estate’s assets, income, and expenses and petitions the county’s Orphans’ Court to approve the account and authorize distribution to beneficiaries. (The estate can also be closed after an informal accounting and a written settlement agreement among the beneficiaries.)

When there is no will, the Register of Wills can appoint a family member, beneficiary, or other appropriate party to be the “administrator” of the estate. To read about who is eligible to be named administrator, click here. An administrator acts in the same manner described above to settle the estate; but instead of distributing to beneficiaries named by the deceased, the administrator must distribute assets as prescribed by Pennsylvania’s “intestacy” statute.

Once distribution has been made to beneficiaries, the executor or administrator files papers to close the estate.

That, in a nutshell, is the probate process. It can sometimes be a simple process, such as when the estate contains only a few bank accounts. In other cases, probate can be a lengthy, drawn-out process lasting years if real estate must be sold, a business sold or wound down, environmental issues addressed, or family disputes (a will contest, for example) resolved.

The executor or administrator is held responsible for knowing the requirements of state law, meeting deadlines, and administering the estate according to the law. For that reason, most hire legal counsel to assist and guide them through probate.

No probate needed for accounts $10,000 or less

When someone dies, it’s not unusual to leave behind a bank account in that person’s name alone, rather than in an account held jointly or with a named beneficiary.

Under Pennsylvania law, someone will have to open a probate estate for such accounts over $10,000. That means going to the Register of Wills office, filing papers, and going through a somewhat involved procedure, sometimes to close only one bank account.

But if the account is $10,000 or less in value, Pennsylvania law allows next of kin to obtain funds remaining in the account with no need to open a probate estate.

This rule is found in Pennsylvania’s statutes at 20 Pa. C.S. § 3101(b). It requires a family member to present to the bank a receipt (or an affidavit of a licensed funeral director) showing that “satisfactory arrangements for payment of funeral services have been made.”

The bank must then pay the amount on deposit “to the spouse, any child, the father or mother or any sister or brother (preference being given in the order named) of the deceased depositor.”

Keep this provision in mind when you’re arranging your personal affairs. If all your other assets are owned jointly, or have beneficiaries (like life insurance or retirement plans), keep any bank account under $10,000 to avoid burdening your family with an unnecessary probate proceeding.

What does an executor do?

After the death of a family member or friend, you find that the deceased’s will names you as the executor of the estate.

What does that mean and what do you need to do?

An executor has a number of important duties. The main ones are to collect and safeguard the assets of the deceased person’s estate; pay debts and taxes; and distribute what’s left to the beneficiaries of the estate.

The first step is to gain official recognition as the executor. In Pennsylvania, that usually means filing the appropriate papers at the Register of Wills in the county where the deceased resided. The Register then issues you a “short certificate” (usually multiple originals) attesting to your authority as the executor.

Using your short certificate, you may sell or liquidate assets and open an estate checking account. You can use funds of the estate to pay bills (after determining that they are legitimate) and taxes.

You can later settle the estate by accounting for what you took in, what you paid out, and what remains. In Pennsylvania, you may file a formal accounting with the Orphans’ Court of the county where you opened the estate and (once any objections are resolved) receive an official decree from the court approving your actions and authorizing distributions to beneficiaries. Or you may file an estate settlement agreement signed by all the beneficiaries.

Once the estate is finalized, the beneficiaries receive whatever they are due.

In a nutshell, that is what it means to serve as the executor of an estate. This entire process is called “probate.”

Keep in mind, however, that there are many more details than could ever fit into a single blog post. Most people don’t know where to begin to file the right papers, and are uninformed about the various duties, deadlines, and responsibilities involved. You don’t want to run afoul of tax laws or probate requirements and suffer the consequences.

My best advice is therefore to consult experienced legal counsel to help you through the probate process. Legal fees are generally tax deductible, and shared by all beneficiaries. Serving as an executor can be a headache, but much less so with the right help.

Why and how to advertise an estate (or trust) administration

You may have noticed legal notices in the newspaper, mixed in with the classified ads, as you turned pages looking for the comics.

If you look closely, you will often see advertisements announcing that the Register of Wills has opened an estate in the name of someone recently deceased, and has appointed an executor to administer the estate.

Why do these ads run, and how is estate advertising done properly?

Pennsylvania law requires the executor to advertise the estate to “request all persons having claims against the estate of the decedent to make known the same to [the executor] or his attorney, and all persons indebted to the decedent to make payment to [the executor] without delay.” (20 Pa. C.S.A. § 3162.)

Advertisement must be made immediately after the estate is opened in a newspaper of general circulation “at or near the place where the decedent resided” and also in the legal periodical designated by the court for publication of such notices. The ad must run once a week for three successive weeks, and must contain the language described in the previous paragraph, along with the name and address of the executor.

The Register of Wills in the county where the estate was opened can help you determine which publications to use. Call the appropriate newspaper and legal periodical for assistance in placing an ad with the required language.

Advertising the estate serves at least two important purposes. First, it allows any potential creditors or claimants one year to makes claims known to the executor. After a year, claims against the estate will usually not be honored, and the executor may distribute the assets of the estate without fear of claims from unknown sources.

Second, advertisement starts the clock ticking on the allowable time for closing the estate. By law, an executor may file an account of the estate administration with the court “after four months from the first complete advertisement” of the estate.

In some cases, there is no probate estate filed with the Register of Wills because all assets of the decedent pass to beneficiaries by means of a revocable trust. The trustee of such a trust may also advertise in the same manner and thereby foreclose claims made more than a year after advertisement. (20 Pa. C.S.A. § 7755.)