Legal Tip of the Week – 1/20/2017!

A question was posted recently in a financial column[1] asking what options a beneficiary of an estate has when the Executor is so overwhelmed with her responsibilities that she seems paralyzed into inaction.  The questioner said that it had been 8 months since the Executor was charged with the responsibility, but that nothing seemed to be getting done though money pouring out of the estate to pay for attorney’s fees.

This question illustrates the frustration of the questioner not only with the process but against the family member that could well have been caused by perceived ineptness of that individual in getting the job done.  Because of this, I want to discuss setting clear expectations for the timeline of estate administration matters.

Generally in New Jersey, where there is a small estate and assets are below a specific threshold[2], an Executor may be able to easily wrap up the estate affairs by merely signing a small estate affidavit or self-executing waivers like an L8 or L9 to release assets to the beneficiaries.  This process could take anywhere between a few weeks to a few months.  But for those estates that may be either ridden with debts, or have significant retirement accounts, or non-Class A beneficiaries, or subject to death taxes (estate or inheritance), the Executor has to proceed with caution.

From the tax return standpoint, the NJ Treasury gives the Executor 8-9 months to file the inheritance or estate tax returns for the estate.  The reason for this length of time is so that the Executor can assess the exact amount of assets in the estate by securing date of death values or getting formal appraisals where needed.  Debts will need to be paid off but again cautiously because there is an order of priority for creditors and tax obligations will need to be satisfied before final distributions are made to the beneficiaries.  If the Executor has retained qualified counsel, then named beneficiaries of annuities or retirement accounts will also be guided on how to properly claim their share of the proceeds in a way that would avoid adverse tax consequences.  Finally, the Executor will be instructed to perform judgment searches on all beneficiaries to ensure there are no outstanding child support judgments against the beneficiary and each beneficiary will need to sign a release waiving liability against the Executor before distributions are made.  All this could take anywhere between 9-15 months, longer if other complications arise.

Therefore, patience is key when it comes to estate administration matters.  It is also important to consult with a qualified probate attorney who can guide the Executor every step of the way.  Paying out attorney fees may actually end up saving the estate money down the road if unnecessary taxes were avoided or litigation by disputing beneficiaries thwarted.

[1] Moneology column in MarketWatch

[2] $10,000 for non-spousal beneficiaries.  See N.J.S.A §3B:10-4