The death of a loved one is an emotional and difficult event. Oftentimes the grieving process and uncertainty as to what to do next lead to a period of inaction that can last for months. Although there are few cases in which immediate legal action is required after a person dies, in general it is a good idea to consult with an attorney within a month or so after a death to determine what steps need to be taken and when.
Here are five things to keep in mind following a person’s death and related time considerations.
- Determine Assets and Debts
The starting point for administering the estate of a deceased person is to compile a list of the assets owned by the deceased (individually, jointly, in trust), the value of those assets, and the debts owed by the deceased at the time of his or her death. Depending on how organized the deceased was, this task can be easy or difficult. The deceased’s mail and prior year’s income tax returns are the most important source of information about assets and debts. It is vital to collect the deceased’s mail and keep it together in a safe place so it can be reviewed and acted upon as needed.
- Gain Access to Assets
A person may own assets in his or her individual name, including bank accounts, stock, life insurance policies, and retirement accounts. Some of these assets (i.e. life insurance policies and retirement accounts) are likely to have one or more beneficiaries named to receive the assets at the owner’s death. When that is the case, the beneficiary must contact the company and file the appropriate forms to claim the assets in the account.
Other assets (i.e. real estate, bank accounts, stock) that do not have a beneficiary designated cannot be accessed until a Personal Representative (PR), formerly called “executor,” is appointed by the court. The appointment of a PR is necessary, whether or not the deceased had a Will. It is a court process that requires the person seeking appointment as PR to complete and file certain forms with the probate court, send notice to interested parties, publish notice of the petition in a local newspaper, and await the court’s approval of the petition appointing the PR. Only when this process is complete can the appointed PR gain access to assets owned by the deceased. In Massachusetts, the appointment of a PR can take anywhere from three to 12 weeks, depending on the county where the deceased lived and the type of probate proceeding required. It is important to be aware of the time involved in securing the appointment of a PR and to begin this process as soon as possible, especially if assets may be needed to pay final expenses or support the deceased’s family.
- Be Aware of the Process for and Timing of Distribution of Assets
Even after the PR is appointed and gains access to the deceased’s assets, bills should not be paid or assets distributed without the advice of an attorney experienced in the administration of estates. Certain creditors have priority over others in terms of payment, and the deceased’s creditors generally have one year after death to make a claim for payment. If assets are distributed to the estate beneficiaries too soon or before all debts are known and funds set aside to pay them, the PR can be personally liable if the estate does not have sufficient assets to pay those debts and if the assets cannot be recovered from the beneficiaries (which they generally cannot be). It is also important to have receipts and releases signed by the beneficiaries for each distribution received. Finally, it is important that distributions are made precisely in accordance with the terms of the Will, which can be complicated if a beneficiary named in the Will has died before the deceased.
- Income Tax Considerations
Depending on the timing of the deceased’s death, it may be necessary to act quickly to meet income tax deadlines and avoid penalties. For example, if the deceased died in the first quarter of the year, it is important to ensure that income tax returns for the prior year are filed or that income tax is paid and requests for an extension are filed in a timely manner. If the deceased died at the end of the year, it is important to determine whether minimum distributions from retirement accounts have been taken, and if not, whether they must be taken before year’s end and by whom.
- Estate taxes
If all of the assets in which the deceased had an interest exceed $1 million, it is likely an estate tax return must be filed by the deceased’s estate with the Commonwealth of Massachusetts (and with the federal government if the estate exceeds $5.34 million in 2014). Estate tax returns must be filed and any amounts owed must be paid nine months after death. Preparing an estate tax return and compiling the information necessary to prepare the return is a complex process — one that requires sufficient time to make sure it is done correctly. If real estate, business interests, or valuable personal property such as artwork or antiques were owned by the deceased, appraisals of those assets may be necessary. If beneficiaries of the estate have large estates of their own, the possibility of a disclaimer should be considered, and care must be taken that the beneficiary not exercise ownership or control over an inherited asset if a disclaimer is being considered.
The settlement of an estate is a process that involves many considerations of timing, tax implications, and liability to the PR. If a family member or loved one has died, it is important to contact an attorney experienced in the administration of estates as soon as possible after death to determine the steps that must be taken and to start the estate settlement process.
Attorney Maria Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC. She is also a director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
May 2014