NOTE ABOUT ESTATE ADMINISTRATION - JAN 2023

I am currently not taking on new probate matters due to my current load of planning commitments as well as my current estates. I hope to be able to do so again in the near future. If you need help with an estate administration in Davidson or Williamson Counties, please contact me and I will be happy to refer you to a few of the many excellent attorneys working in this area.

More about Estate Administration

What is estate administration?  

Broadly speaking, estate administration is the process of transferring a person's assets, winding up their affairs, paying off any final debts, liabilities or taxes, and taking care of anything else that needs to be done as a result of their death.

Is it the same thing as probate?

Although the terms are often used together, probate actually refers to the court supervised process whereby a document is legally established as the last will and testament and a personal representative is appointed to gather the assets of the deceased person, file an inventory of the assets, pay all lawful debts, taxes and expenses, and make the distributions called for in the will.

Who gets to be the personal representative?

Normally they are named in the will.  They are also called the executor or co-executors if there are more than one.

So the personal representative takes care of everything?

Not necessarily.  Often a person who dies has what are called "non-probate assets."  These are assets that are not subject to the terms of the last will and testament and are not part of the court supervised process.  These would be things like life insurance that is payable to a named beneficiary, a joint asset (a house owned by a husband and wife is a common example) or a trust that benefits a new group of individuals once a certain individual dies.

Who takes care of these "non-probate assets?"

It depends.  Often those assets can just pass to the named beneficiary in the case of life insurance or an IRA (Individual Retirement Account) upon presentation of a death certificate and claim form.  Likewise, certain joint assets can be retitled directly in the name of the surviving joint owner.  In the case of a trust, it is usually the trustee who reviews the trust to see what happens after a person who was receiving money from the trust dies.  

How do I know whether something is a probate asset or not?

It is helpful to check the title on all assets.  What does the deed to the house say?  How are the bank accounts registered (check the signature card with the bank)?  How are investment accounts registered?  Are they in an IRA (which usually has a named beneficiary) or just an regular investment account (which may not have a named beneficiary)?  What does the car title say?  If there are insurance policies, check with the insurance company to see who is listed as the beneficiary.  Something that is just in the name of the person who died with no beneficiary designation may well be a probate asset that will pass according to the terms of the will.  If there is a joint owner or a named beneficiary, it could be a non-probate asset.

What about taxes at a person's death?

From the perspective of estate taxes, things are frankly much better than they used to be.   For a person dying in 2024, the tax only applies to an estate larger than $13,610,000, although this amount is currently set to decrease in 2026.  Note that a person who has made large, noncharitable lifetime gifts may have a smaller exempt amount, however since certain gifts can be added back in.  Tennessee used to have its own separate inheritance tax which went away completely in 2016.

Income taxes are more complicated.  While generally speaking an estate or a beneficiary does not owe income tax on property they receive under a will or though beneficiary designation, they very well could owe income tax if the asset passing under the will or through beneficiary designation represented "pre-tax" income to the person who died.  The most common example of this is a “traditional” (ie non-Roth) IRA or a 401(k) type retirement plan which often represents significant pre-tax income.  In addition, if the estate earns income before it is completely distributed, it will have to file an income tax return just like an individual would.  For these and many other reasons, it is important that a personal representative and a person receiving assets both consult with their CPA or other tax advisor to make sure that any income is correctly reported.

A final tax issue that is important to note is that, generally speaking, the cost basis in a person's assets owned at death changes to the fair market value of the asset as of the date of death.  This can have important implications for assets that have increased in value significantly since they were purchased and is another reason to consult with one's tax advisor or CPA.

How long does all of this take?

A court supervised probate administration typically takes anywhere from 9 to 24 months largely depending on whether there is real estate that needs to be sold, creditors' claims to be evaluated or taxes to be paid, all of which add length to the administration. The notice to creditors gives them a minimum of 4 months to file a claim against the estate while estate tax returns must be filed 9 months from the date of death (although they can be extended an additional 6 months) and the estate cannot be closed until they have been approved by the appropriate taxing authority.  Likewise, the time involved to prepare and list a piece of real estate, along with the time it takes to get an offer and close can lengthen the administration of an estate.  In the case of non-probate assets, they can often be distributed more quickly.  However, this can vary depending on whether there are taxes owed or whether there is a dispute as to whether a non-probate asset was intended to pass under the will.