While there is some level of media coverage, as well as television advertising, about the need to make a will or plan one’s estate, we do not hear so much about the need for timely administration of the estate of a loved one who has passed away. If, for example, a parent has died, the children or family will likely take action to administer the estate, whether or not there is a will, when they need to do so to get access to money that is in a bank or investment account. However, over the course of the years I have been practicing law, I have seen numerous instances where a parent has died, and the family did nothing for years to settle the estate until some crisis occurs.
Example: Mother dies with her primary asset being a house in a location in the Philadelphia region. Her husband died years before. She has five children. She had a modest amount of money in the bank, but her bank accounts were owned jointly with one or more of the children and those accounts passed to the children. The total of her assets is well below the level of where federal estate tax would be a concern. Mom had no will. One of the children, “Child A” lives in the house, having moved back in after going through a divorce and then having stayed on to help Mother with keeping the house up, helping with errands and so on. After Mother’s death, Child A stays in the house. There is a mortgage on the house and Child A pays the mortgage, property taxes, insurance, and maintenance. The bank holding the mortgage does not say or do anything because the payments are being made every month on time. Twenty-five years go by and now the situation has changed. Child A is still living in the house. The mortgage has been paid off, but Child A is still paying the property taxes and other expenses.
Meanwhile, Child B, like the whole family, is now twenty-five years older. Child B’s spouse has died, her children are grown up and have moved away. Child B wants to move to Florida to buy a condo so she can enjoy warmer weather and be near some old friends who have moved down there. Child B starts thinking about how she never got her share of Mom’s house and that would be enough money for a down payment on a small condo where she wants to be in Florida.
Child C has died and left three children of his own. Child C planned his estate which was administered but Child C’s grandchildren, who were just very small children when their grandmother died now are thinking they want their shares of their grandmother’s house that their father would have received if he was still alive.
Children D and E are comfortable in their situations and are not in a hurry to get their shares of the house, but they want to make sure they are not left out if anything changes from the current situation.
Child B is calling Child A demanding her share of the house and Grandchildren C1, C2 and C3 are calling Child A wanting the share that belonged to their father. Child A cannot afford to take out a mortgage to pay off B and C’s children and if the house is sold, Child A would not be able to afford to live anywhere nearby in any kind of home as nice as this one. However, even before getting to that, nobody can refinance or sell this house because no one in this family has proper title to it.
To either sell or refinance the house, an estate administration must be raised. Since there is no will, all of the surviving children have a right to seek to be appointed as administrator of the estate. If they cannot agree on who should be appointed, there would have to be a hearing with the Register of Wills to determine that. However, there is another hurdle even before they get to appointment of the administrator. Since more than twenty-one years have passed since Mother’s death, under Pennsylvania law, the Register of Wills cannot act in the usual process to accept a petition for appointment to be an administrator. When so much time has passed, a petition must be filed with the local Orphans Court to request an order directing the Register of Wills to accept a petition.
Assuming that an administrator is eventually appointed, there are more problems lying ahead. At this point the inheritance tax on Mother’s estate is now almost a quarter century overdue. The tax is due nine months after the date of death. Fortunately, the tax will be based upon what the house was worth when Mother died and not what it is worth now, though that requires the extra step of figuring out what the house was worth twenty-five years earlier. Once the tax is calculated, there will be almost twenty-five years’ worth of interest on the tax which has accumulated. Is it possible to pay the tax and accumulated interest without selling the house? Does Child A have the money, or will the house have to be sold to do so?
More issues will arise: Child A has lived in the house without paying any rent though he finished paying off the mortgage that was left when Mother died and he has paid all the property taxes and other expenses. How will all that be reconciled?
If these questions are not resolved fairly quickly, Child B and deceased Child C’s children may file petitions in the Orphans Court demanding that they be paid their equal share of the estate or that the house be sold. Everyone hires lawyers and the expenses of the estate administration go higher.
There are numerous ways the scenario could play out from here but the lessons to be learned are that it would have been best if Mother had a will and/or comprehensive estate plan to direct what would be done with her house and other assets upon her death. Whether or not there was a Will, a lot of time, expense and aggravation could have been saved by moving to administer the estate soon after Mother’s death, rather than letting the situation sit for a generation and then only acting when a crisis has arisen in the family over the lack of administration.
If you are a parent with even a modest amount of assets, give your family the gift of a complete estate plan so there is no dispute as to what you want done with your assets. If you are the children of a parent who died without a will or estate plan, do not put off administering your parent’s estate, as delay will only make administration more expensive, difficult, and time-consuming.
The attorneys of the Estate and Trusts Department at Reger, Rizzo & Darnall, LLP can help you avoid or, if necessary, work through these issues.