Law Offices Of Thomas Sciacca, PLLC

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What to Expect When You’re Expecting … an Inheritance!

Inheritance concept{Read in 8 minutes}  As a Trust and Estates attorney, I represent all sorts of people involved with Estates. This includes next-of-kin when someone dies without a Will, Executors of Estates, those people who wish to challenge Wills, and also, those who are beneficiaries under Wills. Sometimes beneficiaries need counsel, and sometimes they do not.

I thought I would take this opportunity to provide a brief overview of the beneficiaries’ rights and obligations when it comes to inheritance, so that beneficiaries can learn a little bit more and make the best decision for themselves as to whether or not they need counsel. 

First, it’s important to remember that your rights as a beneficiary depend either upon your status as a family member when someone dies intestate, or as a beneficiary under a Will. Unless and until the Court issues Letters to either an Executor or an Administrator, the beneficiary has no right to receive anything. In either situation, before the Court appoints a fiduciary, the beneficiary will receive papers telling them that a Surrogate’s Court proceeding is pending for purposes of appointing a fiduciary (and if the decedent had a Will, admitting the Will to probate). This may take the form of a document called Notice of Probate, or by receiving a Citation

At this time, the beneficiary may choose to contact the nominated fiduciary (or their legal counsel) to find out the status of the Estate. This may not be necessary, and often the counsel for the nominated fiduciary will have already, or perhaps simultaneously with receiving papers, reached out to the beneficiary to let them know what is coming and give them an expectation of the timeline.

When it comes to payment of a bequest, it is important to remember that this does not happen immediately. It may seem very tempting when one gets notice of a forthcoming inheritance in the mail to go on a spending spree or plan a grand trip. However, it could be months (or in some cases where the Estate is heavily litigated, even years) before you have a check in-hand. Once the Court appoints the fiduciary, the fiduciary will first be involved in collecting assets of the Estate, paying funeral creditors, regular creditors, and paying the expenses of administration such as legal accounting and appraisal fees.

In the case of a beneficiary of a Will, if those challenging the Will successfully convince the court to deny probate, that beneficiary may not receive anything by way of an inheritance at all. 

Also, a good Executor or Administrator should wait at least seven months from the issuance of Letters before making distribution of the estate assets to the beneficiary. This is because it is at this time that creditors must present claims they may have against the Estate. Also, sometimes it may take the Executor a while to liquidate assets, determine what assets are worth, and perhaps sell real property to provide cash to the ultimate beneficiaries. However, at the end of the day, the fiduciary will have a pot of money and should be prepared to make distribution of bequests.

A beneficiary should expect to receive notice from the fiduciary or their counsel when this time has come. If the beneficiary feels too much time has passed (at minimum seven months from the date that the court issued Letters), the beneficiary can compel an accounting, forcing the fiduciary to come before the judge and explain the status of the Estate, and provide information concerning transactions to date.

Very often beneficiaries can do this without even retaining counsel. The fill-in-the-blank forms are available on the court’s website here.

What will this communication notifying the beneficiary of the imminent payments contain?

Well, very often it will contain information on the size of the inheritance. For those people who receive a specific cash amount under a Will, it may be obvious what they are receiving. However, those people that get a percentage of the remaining assets after payment of debts and expenses, will not know the exact amount until the Executor provides them with this information.

This document or this communication will often be accompanied by an informal accounting, whereby the Executor advises the beneficiaries as to how he or she calculated that beneficiary’s share. This will look like an official court document under most circumstances, however, it is rarely filed in courts. The counsel for the fiduciary will also often ask the beneficiaries to sign a document called a Release & Refunding Agreement: The point of this document is that the beneficiary:

– Acknowledges receipt of the payment;

– After reviewing the fiduciary’s calculations concerning the amount of the bequest, releases the fiduciary from any further liability concerning the administration of the Estate; and

– Agrees to refund any amount improperly paid to them as beneficiaries — for example, if more creditors came forward, or the courts subsequently revoke the fiduciary’s ability to make such a distribution (this would be a rare but not unheard of occurrence).

Most fiduciaries’ counsel will ask the beneficiary to sign this document prior to actually receiving the payment check or distribution of assets. Why? Because the beneficiary has no incentive to sign it once they’ve already received their inheritance. Counsel will often invite beneficiaries to come to their office to exchange the check for the signed form, or agree to send the check by certified mail within a certain amount of time from the attorney receiving the signed forms.

What sort of information should the beneficiary be prepared to provide? Well, the beneficiary really should make sure that the fiduciary has the following information:

First — the beneficiary has a vested interest in making sure that the fiduciary or counsel for the fiduciary can find them when it comes time to make the distribution. The beneficiary should be sure that the Executor or Administrator has their current contact information including address, telephone number, and email address for this purpose. 

Second — if the beneficiary changes their name either since the deceased wrote their Will, or during the pendency of these state administrations, the beneficiary should keep the Executor or Administrator informed of that information so that the check is properly payable.

Finally — the fiduciary will also need the Social Security number or Taxpayer Identification Number of the beneficiary. We’ll often request that the beneficiary provide this by completing IRS Form W-9.

While beneficiaries generally receive their distributions free of income taxes, this is not always the case, particularly where the Estate has to pay income tax because it received assets such as a retirement account or the ongoing collection of rent or royalties. Also, this may be necessary to report if the Estate has to file an estate tax return.

So as you can see, with a little bit of information, a good beneficiary can take care of most of these things by themselves. However, if the Estate becomes litigious or if the beneficiary is not receiving any information from the fiduciary or their counsel, the beneficiary may wish to consider retaining an attorney to advocate for their rights.

 If you or someone you know would like information on this topic, please contact me.