Estate administration is the process of collecting and transferring assets from a decedent to the decedent’s beneficiaries. The process may involve a probate proceeding in the Surrogate’s Court to appoint Executors, Trustees and Guardians named in the decedent’s Last Will and Testament, working with beneficiaries to transfer and retitle non-probate assets, such as retirement plans, annuities and life insurance, and preparing and filing federal and state estate tax returns, along with the decedent’s final income tax return and fiduciary income tax returns for the estate.
Probate is a court proceeding where a decedent’s Will is presented to a judge to prove its validity and authorize the appointment of Executors, Trustees and Guardians named in a decedent’s Will. In New York State, the Surrogate’s Court oversees probate matters in each county.
Once an Executor is appointed, the Executor can begin to collect the decedent’s assets, open up accounts in the name of the estate, sell assets such as real estate and marketable securities to provide the estate with liquid funds, and pay any of the decedent’s debts or expenses.
In addition to collecting assets and paying debts of the decedent, an Executor may need to file an estate tax return for the estate, file a final personal income tax return for the decedent and a fiduciary income tax return income received by the estate. Prior to closing the estate and distributing the remaining assets to the beneficiaries, an Executor may need to prepare an accounting detailing the assets collected, expenses paid and proposed distribution to each beneficiary.
New York State law allows Executors to receive payment in the form of a commission, which is determined as a percentage of the decedent’s probate estate. The commission rate ranges between 5% and 2%, decreasing as the size of the probate estate increases.
The probate estate includes any assets owned individually by the decedent at death that do not name a beneficiary, such as bank accounts, taxable investment accounts, real estate, personal property such as cars and jewelry. Assets such as retirement plans (401(k), IRA, 403(b)), life insurance and annuities pass directly to beneficiaries designated by the decedent. In some cases, if no beneficiary is named, these assets may be included in the probate estate. Other assets may be jointly owned, in which case the asset will pass automatically to the surviving joint owner. Transfer on death designations allow a decedent to direct that an asset pass outside of the probate estate, directly to named beneficiary(ies).
New York State law requires that certain family members, beneficiaries and fiduciaries named in the Will receive notification of a probate proceeding, so that they have an opportunity to appear in the Surrogate’s Court and present any objections to the Will or the appointment of the Executor.
A person or entity must having standing, or a financial interest in the outcome, to be able to contest a Will. For example, a child disinherited by a parent should have standing the challenge the parent’s Will. Even if someone has standing to contest the Will, the person must prove to the Surrogate’s Court that the Will was invalid in order to change the distribution provisions or the appointment of the Executor.
While the Will reading has made for many dramatic moments in movies and television throughout the years, this is not required in New York State.
Each estate is unique, the amount of time to administer an estate depends upon whether there are objections to the Will or appointment of the Executor, the time necessary to locate and notify beneficiaries and other interested parties, whether sufficient assets are available to pay debts or if it is necessary to negotiate with creditors, and if an estate tax return is necessary, when the estate receives a closing letter indicating no additional estate tax is due.