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What is a Small Estate Petition?

by | Mar 7, 2021 | Estate Planning

When a loved one passes away, most estates are administered through a formal probate process.  When we are NOT going through a pandemic, this would involve appearing before the Register of Wills and requesting to be appointed executor or administrator using a document called “a Petition for Grant of Letters”.  After being sworn in, the selected individual would be given Letters Testamentary or Letters of Administration (depending on whether the individual died with a will or without a will) and some short certificates (a shorter version of the Letters of Testamentary that are more widely accepted by both asset holders and creditors). Letters allow the appointed representative the authority to sell property belonging to the decedent, to pay debts and expenses, to close bank accounts, and to file taxes on behalf of the decedent.  Being appointed the representative comes with numerous responsibilities as well.  The representative must advertise the estate opening in both a local newspaper and law journal, notify potential beneficiaries that an estate has been opened, pay the decedents VALID debts, and prepare and file income tax returns and the Pennsylvania Inheritance Tax Return (within 9 months of date of death).  There are almost 70 steps involved with properly administering an estate in Pennsylvania.  Skipping steps does come with consequences that could result in personal liability and responsibility.  That is one of the reasons that most representatives acquire legal representation to assist in this year long process of handling the administration of an estate.  The personal representative is generally allowed to take a fee for assisting in the estate process because it is quite a lot of work regardless of the size of the estate.

The attorney fee and executor fee are either billed on an hourly basis or a percentage basis (known as the “Johnson Fee Schedule”).  While most estate attorneys and personal representatives prefer to use the Johnson Fee Schedule, the issue becomes what happens when there is a smaller estate?  Most attorneys will only handle small estates on an hourly basis.  The problem becomes, sometimes, the cost of formal probate could significantly reduce the small inheritance that the decedent’s heirs could receive.  That is why Pennsylvania allows for a Small Estate Petition to be filed directly with the Orphans’ Court if an estate has less than $50,000 in assets and no real property.  While small estates still come at a cost, some of the more formal costs are avoided such as advertising the estate and paying probate fees.

Any party with an interest in the decedent’s estate may bring this Petition before the Court.  The Small Estates Petition must provide the Court with: (1) a list of all the decedent’s personal property and the value of each item; (2) a list of all known debts of the decedent and the value of each claim; (3) the type and amount of any taxes due as a result of the decedent’s death, including the Pennsylvania Inheritance Tax; (4) the names of all beneficiaries of the estate (as determined by the decedent’s will or the laws of intestacy) and their relationship to the decedent; and (5) the proposed distribution of the estate. The Orphans’ Court Judge will review the information and issue an Order authorizing the petitioner to pay the debts, expenses, and taxes and distribute the remaining estate as detailed in the Petition. If the petitioner fails to distribute per the Order that was issued, the petitioner may be held personally responsible to the creditors and beneficiaries of the decedent.  That is why the petitioner must obtain any and all information about the value of the decedent’s assets as of the date of death from all financial institutions and obtain appraisals or other valuations for any and all personal property.  The petitioner cannot list “estimate values” for property on the petition.  Formal appraisals are required in most counties.

It is important to note that filing a small estate petition does not impact the “creditor order of priority” of creditors.  All creditor claims, administrative expenses, and taxes must still be paid before any beneficiaries receive any inheritance regardless of whether or not a formal probate process or small estate petition is used. The petitioner must still file a Pennsylvania Inheritance Tax Return in ALL estates (even if no taxes are due!)  This is so crucial that many counties require the inheritance tax return to be filed at the same time as the petition.  The petitioner of a small estate petition must still send formal notice to the estate’s intended or potential beneficiaries as part of the process regarding the petition being filed with the court.

Rick Law assists clients regularly with administering estates of all sizes.  For a free consultation, please reach out to Charles Rick, Esquire.  He is more than happy to answer any questions that you may have.  Feel free to either call to schedule the appointment, or use the link below.

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