PROBATE AND ESTATE ADMINISTRATION

If the deceased left a Will, the person named in the Will as Executor must file a Petition with the Probate Court requesting that the Court issue Letters Testamentary, granting authority to administer the Estate.

If there is no Will, the heirs can nominate someone to serve as the Administrator. Unless all the heirs consent to waiving certain requirements and granting full powers, the Administrator will be required to file an Inventory of the assets, as well as annual accountings, and will have to get a Court order to sell Estate assets.

The Executor or Administrator (the term “Personal Representative” includes both) is responsible for locating, identifying and taking possession of the deceased’s probate assets. This is called “marshaling the assets.” Probate assets can include bank accounts, investments, personal effects, and real estate. Certain assets, such as life insurance or retirement accounts that designate beneficiaries, payable on death accounts, or property owned jointly with right of survivorship, are not part of the probate estate.

The Personal Representative is required to notify creditors, and pay the debts. Georgia law sets out the order in which estate debts are to be paid. If there are not enough assets to pay all the creditors, those lower on the list of priorities are not paid.

When all creditors, expenses of administration and taxes have been paid or provided for, the Personal Representative may make distributions to the beneficiaries according to the provisions of the Will, or to the heirs according to the rules of intestacy.

When the estate has been completely administered, the Personal Representative should apply to the Probate Court for discharge from office and all liability.

Estate Tax Returns

In 2017, Executors are only required to prepare and file a federal estate tax return if a decedent’s gross estate is more than $5.49 million, which is the current federal estate tax exemption. Georgia does not impose a state level estate tax regardless of the decedent’s net worth.

However, an Executor needs to know all the elements that go into calculating a person’s estate, and make sure that the estate falls within the exemption. Jointly owned assets, retirement accounts, assets held in trust, and life insurance proceeds all might be transferred outside of probate, but for tax purposes, they count against the exemption. At the time an Executor sells or distributes the assets of an estate, the Executor will often need to certify that no estate tax is due. Having someone familiar with the rules review the facts of your case provides peace of mind and can also save thousands of dollars in interest and penalties.

There are also several reasons why an Executor might want to take the time to appraise the assets of a deceased loved one and report those values on a tax return even if the estate is less than $5.45 million. The first reason is to establish the income tax basis of inherited assets, because any capital gain or appreciation that has built up during a decedent’s lifetime should not get taxed when sold by someone who inherits it if the basis is properly documented at the time of inheritance.

The second reason is that recent changes in the estate tax law allow the estate of a deceased spouse to transfer any unused exemption to a surviving spouse. In other words, a widow can boost her own estate tax exemption if she prepares and timely files an estate tax return at the time her husband passes away. The estate tax return comes due just nine months after the death, so it is important to sit down promptly with a specialist in estate planning and estate administration to decide if the benefits of filing outweigh the costs.