Decedent Estate

What is a Decedent Estate?

A Decedent Estate is the entire property left behind when an individual dies. The Decedent Estate is a legal entity defined for federal tax purposes.  The estate is not taxed, but the individuals receiving benefits from the estate may be taxed on the distributions.

Decedent Estates generally exist as a separate legal entity from the individual who passed.  The estate is created automatically upon his or her death. Generally speaking, any beneficiary receiving more that $600 from the estate must file an income tax return on income from this estate type.  Additionally, a nonresident alien beneficiary must file, regardless of the amount. The estate automatically terminates when all assets are distributed, usually within two years from the date of death.

What is the legal process for a Decedent Estate?

Decedent Estates first enter probate. Decedent Estates are administered by an attorney or trust officer as designated by a will or appointed and sworn in by the court.  That individual is responsible for settling the estate by first paying outstanding taxes and debts of the estate.  Next, a death notice is issued to notify the public and any potential creditors or interested parties.  The administrator must contact all known parties to contracts and agreements and listed beneficiaries. When a Last Will and Testament is present, probate decides if it is valid.  Once approved, the administrator will begin distributing assets based on debts, the Will and state law. Where no will exists, the state will designate heirs based on state law.

In order to settle the estate, the administrator needs all personal and financial information of the deceased.  The administrator must contact all parties involved in contracts, from life insurance to debts, and complete the requirements of the contracts.  As an alternative, you can hire an attorney or other financial professional to administer the estate, and turn over the information to that individual.

The decedent’s contracts are also important to gather and note.  Did the decedent have life insurance?  A Will?  Locate all documents from Trust Agreements, deeds, mortgages and any other financial contracts.  These outstanding contracts will help determine the size and scope of the estate and ensure debts are settled by the estate as opposed to next-of-kin.

Financial documents should include bank account and lockbox or safety deposit box information. Accounts are typically frozen at the time of death, and may require a representative from the state tax agency to access.  An inventory of physical assets and property will also be performed.

How do I prepare my estate?

It is best to prepare your estate formally with a Last Will and Testament and Trust.  Preparing your estate in advance preserves your wishes for the distribution of your property and assets.  Your beneficiaries may have to deal with tax ramifications, debts and assets they are not aware of.  No one knows your possessions and intentions better than you.  An attorney can counsel you on the legal and tax ramifications of your decisions.  The better you prepare your estate, the easier it is for your beneficiaries to benefit from their inheritance.

Eileen Kerlin Walsh P.C. and Associates are offer extensive estate planning and trust experience.  Please call 708-448-5169 to schedule a consultation.