Estate administration can generally be broken down into three stages:
- Tax Returns
- Implementing the Estate Plan
Each stage of the process has unique and specific requirements and every estate is different, presenting unique concerns, assets and complications. A Comiter, Singer, Baseman & Braun Palm Beach County estate attorney can advise what to expect during each stage of the estate administration process.
The Probate Court
The first step of estate administration involves the probate court. Probate is the legal process of settling a decedent’s affairs and distributing the decedent’s property in accordance with the decedent’s estate plan. The probate court’s main function is to admit the decedent’s will to probate (i.e., establish the validity of a decedent’s will) and appoint a personal representative of the decedent’s estate.
The probate process begins with the filing of a petition for administration by an interested person in the estate, typically the person named as the personal representative in the decedent’s will. The petition is filed in the probate court in the county of the decedent’s domicile at death. In order to admit the will to probate, a judge must conclude that the will offered for probate is the decedent’s will, was executed in accordance with Florida law, and was never revoked. The petition also requests the judge appoint a personal representative. Preference in this matter is generally given to the person named in the decedent’s will unless such person is not qualified to serve under Florida law.
What is a Personal Representative?
A personal representative is a person or entity (such as a bank or trust company) responsible for the management of the decedent’s estate. In some states, a personal representative is referred to as an executor.
A personal representative has four main jobs:
- Collect and track down the decedent’s assets
- Pay the decedent’s debts and the expenses of administration
- File any necessary tax returns
- Distribute the remaining assets to the beneficiaries of the estate in accordance with the terms of the decedent’s will
Personal representatives are essentially a liquidator of a decedent’s estate. A personal representative, similar to a trustee of a trust, is a fiduciary and is therefore held to a very high standard of care when managing an estate. A personal representative is liable to interested persons in the estate for damage or loss resulting from a breach of this duty.
Mandatory Duties for Personal Representatives in Florida
Florida law imposes certain mandatory duties on the personal representative during the estate administration process:
- The personal representative must give notice to creditors that the decedent has died by publishing notice in a newspaper in the county where the estate is administered and by serving a copy of this notice on known or reasonably ascertainable.
- The personal representative must also prepare and file an inventory with the court and provide a copy to residuary beneficiaries and other interested persons who request a copy.
- The inventory is a list of the estate assets and their values as of the decedent’s death.
Once the estate administration has concluded, the personal representative must file a final accounting and a petition for discharge which includes a plan of distribution of assets. An accounting is a list of the assets that remain at the end of the accounting period and a schedule of all cash and property transactions since the date of the last accounting or, if none, from the commencement of the estate administration. The estate beneficiaries may waive the requirement of the final accounting.
In all, the personal representative owes obligations to the beneficiaries of the estate, the creditors of the estate, the probate court, and, of course, the Internal Revenue Service (IRS).
The personal representative is required to file any unfiled income tax returns of the decedent (Form 1040), including a final income tax return for the year of death. Further, the personal representative is required to file income tax returns for the estate (Form 1041) reporting income earned during the administration of the estate. (An estate may elect to have a fiscal year rather than using a calendar year.)
Although the state of Florida does not impose an estate or inheritance tax, the federal government imposes an estate tax. If the sum of the value of all of the decedent’s assets and taxable gifts made by the decedent during life exceeds the decedent’s estate tax exemption ($11,580,000 for 2020), the personal representative is required to file an estate tax return (Form 706).
The personal representative is required to list on the estate tax return reports all of the decedent’s assets and their values as of death (or in some cases, a date six months after death). The decedent’s debts, the costs of administering the estate and the value of assets passing to charity or a spouse may generally be deducted on an estate tax return. The return is due nine months after death; however, this due date may be extended one time for an additional six months. The return is required to be filed whether or not estate tax is due.
Estate Tax Explained by a Florida and Palm Beach County Estate Attorney
To illustrate the estate tax rules, assume a decedent who had made no taxable gifts during life dies in 2020 owning assets valued at $15,000,000 and all of such assets pass outright to the decedent’s surviving spouse. Under these facts, the personal representative is required to file an estate tax return because the decedent’s gross estate exceeds the decedent’s estate tax exemption ($11,580,000); however, no estate tax is owing because all assets passing outright to the surviving spouse qualify for and unlimited federal estate tax marital deduction.
Implementing the Estate Plan
The final stage of estate administration is the distribution of the decedent’s assets in accordance with the terms of the decedent’s estate plan, which involves retitling and transferring such assets to the beneficiaries or to trusts for their benefit.
This stage of estate administration requires reviewing the decedent’s will and revocable trust (if any). Additionally, the decedent may have exercised powers of appointment or created irrevocable trusts during life that may be affected by the decedent’s death.
Finally, the personal representative should ensure that the decedent’s “non-probate assets”—that is, assets that pass by beneficiary designation or survivorship rights, and not under the terms of the will—are properly retitled.
Contact a Florida and Palm Beach County Estate Attorney to Learn More
To learn more about the estate administration process and how working with a Florida and Palm Beach County estate attorney can help, contact Comiter, Singer, Baseman & Braun, either online or by calling us at 561-626-2101 or toll-free at 800-226-1484. We work with clients throughout the state of Florida.