Estate Administration Stages

Embarking on the administration of an estate can feel daunting, but understanding the journey ahead can provide clarity and confidence. At our firm, we break down the process into clear, manageable stages, ensuring you are well-informed and prepared every step of the way. Here's a roadmap of what to expect:

Stage 01: Executor/Administrator Qualification

If there is a will, the first step in the Estate Administration Process is called "Probate." Probate is the process of submitting the will and other documentation to the Surrogate's office and qualifying as Executor. The earliest this can be completed is 10 days after the decedent's death.

If there is not a will, there is a similar process by which you will qualify as Administrator, rather than Executor.

In order to qualify as Executor/Administrator, we need you to gather the following items:

1. Original will
2. Death certificate
3. Names and current addresses of all of the beneficiaries listed in the will AND all of the next-of-kin of the decedent (person who died), even if they were not named in the will. We will help you determine who counts as "next of kin" if there is any confusion
4. For intestate estates, an approximate net value of the estate (everything owned by the decedent like bank accounts and real estate minus expenses you expect to pay like the funeral). There is a simplified procedure for small estates, so we need to see what your situation will be.

Together with the information you provide us in your intake questionnaire, we will complete the court's application and submit the documents in order for you to qualify. This process is usually done in person, although since the start of the Covid-19 pandemic courts were completing the process via mail. Depending on your location and the county, you may be able to choose to go in person or complete this step via mail.

Key Terms:

Surrogate - The Surrogate Court is a court that handles limited matters such as Estates, trusts, and guardianships. The position of Surrogate also refers to a person, who is both the judge of the Surrogate Court and Deputy Clerk of the Superior Court Chancery Division Probate Part.

Superior Court Chancery Division Probate Part - The courts in NJ start at the level of Superior Court, then the Appellate Part, then finally the Supreme Court. Lawsuits start in the Superior Court. The Chancery Division is once branch of the Superior Court that deals with certain matters - ones that cannot be resolved by ordering one person to pay another. Probate Part refers to the part that handles estates and guardianships.

This link will bring you to a page with a graph of the courts, for a better visualization and more information.

Below you can find a chart of the court system in case you have trouble loading the page.

Probate - The process of presenting the will, death certificate, and application to become Executor to the Surrogate and proving the validity of the will. Most wills are "self-proving" which means that they contain specific language that proves their validity, but in rare cases with very old wills, more steps are needed.

Qualify - to "Qualify" as Executor/Administrator is the legal term for completing your application to become Executor/Administrator and receiving your Executor/Administrator Certificates and Letters Testamentary.

Executor/Administrator Certificate - You will receive this certificate upon qualifying as Executor/Administrator. You need originals for various things like closing out financial assets and opening an estate checking account (more on this later).

Letters Testamentary - This is similar to the Executor Certificate but a longer form as it has a copy of the will attached. The court will issue only one Letters Testamentary but will make more Executor Certificates if needed. This does not apply to intestate estates.

Decedent - Term for the person who has died.

Estate Administration - The process of determining the assets and debts of the decedent, disposing of any tangible property ("disposing" can mean donating, selling, throwing away, etc.), marshaling the assets, producing a final accounting, and paying the beneficiaries.

Executor - That's you (for testate estates). Your job is to administer the estate (see "Estate Administration" definition). It sounds like a lot, but don't worry! We are here to accompany you in every step. 

Administrator - That's you (for intestate estates). You have the same job as an Executor - to administer the estate.

Testate - The decedent died with a will.

Intestate - The decedent died without a will.

Stage 02: Immediate Steps After Qualification

Notice of Probate

A notice must be sent to all beneficiaries and next-of-kin (NOK) that the will has been probated and that the beneficiaries and the NOK have a right to view a copy of the will.

The notice must be sent to all NOK even if they are not named in the will. The primary reason for this is that all NOK have the right to contest the will, so they have to be notified and have the chance to review the will.

We will send out the Notice of Probate, after which time we need to file a Proof of Service to the court, which is a document that states that we delivered this document to all NOK.

Estate Checking Account

1. We will obtain an EIN (taxpayer ID for the estate) for you.
2. You will open up a checking account in the name of the estate. Into this account you will deposit any other financial assets that you close out and the funds from the sale of any real or personal property as well as any income paid to the decedent. You will also pay bills from this account, order checks.

L-9 (If Applicable)

We will prepare a Form L-9 if the estate qualifies for it. If there is real estate to be sold, and if all the beneficiaries are Class A (more on this later), this document can be filed to obtain an Inheritance Tax Waiver (again, this will be explained more in depth later). If the beneficiaries are not Class “A,” Then an Inheritance Tax Return will be filed later instead of the L-9 now.

Key terms:

Beneficiary - Someone who was named in a will to inherit a decedent's estate. This is different from an heir.

Heir - A legal heir is the name for person who inherits if there were no will.

Next-of-Kin - The most closely-related family members to the decedent. If there are no close family members, this can become very complex, but there are state statutes (laws written by the legislature) to determine who is who. Please note “closely related” refers to blood relations, not the level of closeness you have in terms of your personal relationships.

Contest - Another word for "challenge" as in, challenge the validity of the will. This happens most often when someone was written out of a will or their share was reduced and they feel it is because someone unfairly influenced the decedent to change their will.

Class A Beneficiary - Refers to direct ascendants (parents/grandparents) or descendants (children/grandchildren) and domestic partners of the decedent.

This link will bring you to an explanation of the other beneficiary classes.

Stage 03: Documentation Gathering. This will be done simultaneously with Stage 04.

Now that you have probated the will, the most significant portion of the estate administration process will begin.

Right now, we need you to gather as much documentation you can regarding the financial affairs of the decedent. Please do your best to locate the documents listed below. If the decedent had an accountant and/or financial planner assisting them, these individuals may be helpful in the information-gathering stage.

1. Deed and Title Insurance Policy for home or other real estate (and prior appraisals for real property if you have them)
2. Death Certificate for prior spouse if applicable
3. Copies of bank/brokerage account statements; copies of stock certificates; dividend statements; copies of statements from any other financial institutions. These statements should show the value on the date of death (DOD) or at least be from the period that covers that date.
4. Copies of life insurance and annuity policies and beneficiary designations for such policies
5. If there are vehicles - title, registration, and insurance information. We will also need a Kelley Blue Book value or an appraisal (we will discuss what is most appropriate for your scenario with you)
6. Outstanding bills, invoices, or other evidence of debts owed
7. Funeral bills
8. Medical bills
9. Prior income tax returns

Stage 04: Disposition of Personal Property

If the decedent died while living at home, there will likely be a lot of personal property to go through. Even if the decedent died in a nursing home, there may still be some personal property in storage. These are the steps you should take to deal with the personal property.

1. You will determine if there are any personal items that were left to specific beneficiaries in the will or a separate document dictating how personal property is to be distributed (often there is a separate document). One you have identified them, they should be separated and kept safe so they can later be distributed.
2. This next step is highly situation-dependent. We will review your situation with you to see what is appropriate. Depending on the terms of the will, if there are other personal items that family members want, and there is no argument over who gets what, in many cases we can allow for small sentimental items to be given to family members. This does not apply to very valuable items, which should be appraised and sold, although they can be distributed to beneficiaries as part of their share of the estate, their value subtracted from any money they receive. Any items to be given away should be set aside for now to be distributed later. Example: Grandma's favorite sweater can be given to a family member. Grandma's full-size Steinway grand piano needs to be sold. As long as there is no argument amongst the beneficiaries, it can be sold to a family member or friend not named in the will as long as full market value is paid.
3. If needed, obtain appraisals. Depending on the situation, there may be items of value that should be appraised (grand piano, paintings, vehicles, quality furniture, other collectors' items, etc.)
4. Once you have determined what items are to be distributed to family and have separated them from those that are to be sold, donated, or thrown away, you need to clear out the rest of the personal property. You can hire an auction company to sell all of the personal items. Depending on the situation, you may also donate or throw away items. We will discuss with you what is most appropriate. Please do not begin throwing items away without consulting us on the best course of action.

If you are the only beneficiary of the will or the only heir (for intestate estates), you can do as you see fit, but if there are other beneficiaries, this needs to be done quickly and in the way that will maximize the value of the estate. Often, retaining professionals is more cost-efficient than doing it yourself because the rent or the mortgage + property taxes that might accrue if you take a long time do to this yourself cost more than the professionals.

Key Terms:

Personal Property or Personalty - Property is divided into two categories - personal and real. Real Property refers to real estate (houses, land, etc). Personal property is anything else that is tangible, from vehicles to hearing aides.

No, that is not a misspelling of "personality." "Personalty" is a legal term for personal property.

Stage 05: Pay Debts and Marshal Assets

This is the biggest piece of most estate matters. The following steps are numbered for easy reference and are generally in the order in which they occur, but there is a lot of overlap, so think of this as a general guide.

3. If there is real property, you will work with a realtor to list and sell it (unless it is specifically to be given to a beneficiary per the will or if a beneficiary wants to buy it). We can handle the real estate piece for you. There is a different process for which we will send you details.
4. If the decedent was a Medicaid beneficiary, Medicaid will send you a questionnaire to fill out. We can assist you. Medicaid will send you a lien notice saying how much is owed, if any. It is very important that Medicaid be paid. Medicaid has priority over most other debts.
5. You will close out any financial accounts that are in the decedent's name alone and do not have any named beneficiaries. Some assets may also be transferred "in kind" (meaning, you do not have to close out an investment but can transfer it to someone else). If you plan to do this, do not close them out at this time. Jointly-owned assets and assets with named beneficiaries will be handled differently. Based on the information you provided in Stage 3, we will help you determine how each asset needs to be handled.
   
   Note: If you are a Class A Beneficiary, you will need to fill out a form L-8 while at the bank. If you are any other class of beneficiary, the bank will likely give you only half or less of the funds being held until they receive an Inheritance Tax Waiver (see Stage 8 for full description.)
6. You will notify any known creditors of the decedent's passing and see if any debts will be waived. If they will not be waived, then you need to pay them with estate assets (NOT YOUR OWN MONEY). Note, if there is nothing left after paying Medicaid (if applicable), there are other steps we will need to take. Funeral and medical bills need to be paid first, before other debts like credit cards.
7. At this time, it may be the case that there are some assets that pass outside the will (non-probate assets), and it may be possible to distribute these assets now. We will review with you to see if that is the case for you.

Everything you do in this section needs to be accounted for, so please keep track. You do not need to know any fancy accounting software, an Excel chart or something similar is sufficient.

Also, to the extent possible, debts/expenses should be paid by checks from the estate account. If something must be paid via a credit/debit card, you can pay and reimburse yourself. Please avoid the use of cash.

It is important to be detailed with this.

For debts - Who did you pay? When? Why? How much? Scan and keep the receipt.

For assets - What was the asset? What was it worth on DOD? What was it worth when you sold it/closed it out? What is the institution and account number? For personal items, do a bill of sale where appropriate (e.g. for cars - we can help with this) and/or keep copies of receipts given to the purchasers.

For income - Who paid you? When? How much? What for?

You will need this information in Stages 8 and 10.

Key Terms:

Estate - This refers to absolutely everything that the decedent owned on the date of death (DOD).

Assets - Refers to all financial accounts, real estate, and personal property owned by the decedent

Probate Assets - Assets that will be distributed according to the terms of the will

Non-Probate Assets - Assets that will be distributed according to beneficiary designations on the accounts, not by the terms of the will

Real Property or Realty - Real estate

Creditors - Refers to the person to whom the decedent owed a debt

Marshal - Methodically assemble and arrange (as it applies to estates, this means the act of locating the probate assets, selling/closing them, and depositing them into the estate account)

POD/TOD - Payable upon death or transferrable upon death. Accounts that have POD or TOD beneficiaries listed are non-probate assets, as they will be transferred directly to the POD or TOD beneficiary.

Stage 06: Estate Income Taxes

You will need to pay taxes for the last year the decedent was alive.

There may be an estate income tax return due the following year if there was more than $600 worth of income paid to the estate. For example, if more than $600 was paid from stock dividends.

We recommend engaging an accountant for these returns.

Stage 07: File Inheritance Tax Return/Obtain Tax Waiver

Depending on who the beneficiaries of the Estate are, we need to file one of the following documents.

Form L-9 for Class A beneficiaries (only if there is real estate). If this applies to you we likely did this already towards the beginning of the estate administration process.

Inheritance Tax Return for all other beneficiaries, even if there is not real estate.

In rare cases we file a Form L-4 instead. We will tell you which is appropriate.

In order to sell real estate, and, if beneficiaries are not Class A, in order to close out financial assets, you need an Inheritance Tax Waiver (a/k/a Form 01). Filing any of the above-mentioned forms will result in the State of NJ producing the waiver(s).

Once filed, the State can take several weeks to several months to generate the waiver. The Inheritance Tax Return takes the longest, so we want to do it as quickly as we can, but not so soon that we don't know the full picture of the estate assets, debts, and deductible expenses. We will use the information you gathered in Stage 6 to complete the Return.

Key Terms:

Inheritance Tax - Beneficiaries who are not Class A have to pay a tax on their inheritance. This tax varies depending on what class. For example, siblings, who are Class C, pay less than cousins, who are Class D.

Estate Tax - New Jersey no longer has an estate tax. There is a Federal Estate Tax on estates valued at over $12.06 million. This is a tax on the whole value of the estate, before the tax on each beneficiary's share is calculated.

Inheritance Tax Waiver - A document generated by the State of NJ that states that Inheritance Taxes were paid (or did not apply) and that a specific financial account or funds from the sale of real property can be released.

Stage 08: Follow Ups

At this point, we are going to take a little breather as we wait for some items to come in. The following actions should have been done to the extent they apply to your situation:

• All personal property specified in the will or list for personal property distribution set aside.
• All personal property picked out by other family members set aside. 
• All other personal property disposed of (sold/donated/thrown away)
• All real property sold
• Inheritance Tax Return filed and taxes paid
• Estate Income Tax Return filed
• Medicaid lien paid
• Funeral and medical bills paid 
• All other debts paid

At this point we need to wait on a few things to come back to us:

• Inheritance Tax Waiver
• Tax refunds (from income tax filing)
• Proof from Medicaid that their lien has been discharged
• Proof from any debt collectors that debts have been paid in full

Once we have the Inheritance Tax Waiver, we will record it with the county clerk. Once recorded, the title company from the real estate sale will release any funds held in escrow.

After we are certain we have 1. Marshaled all the assets 2. Recieved all income/refunds that decedent is entitled to 3. Paid all the debts, 4. Recieved verification that any liens have been discharged and any debt collectors have acknowledged payment in full 5. Recorded the Inheritance Tax waiver and had all escrows returned to us....then we can move on to doing a final accounting and making distributions.

Key Terms:

Record - Certain documents are "recorded" with the county clerk (different from "filing" with the court.) The clerk indexes the documents - in other words, makes a record in a book referencing the information contained in the document - and takes a digital image (scan) of the document. These documents are then searchable by any member of the public. When you record a document, the original document is returned to you listing the book and page number in which it was recorded. This link is a description by the Hunterdon County Clerk of what the clerk does.

Escrow - In a real estate sale, sometimes all or part of the proceeds need to be held back to make sure that the Seller does something. For example, if the Seller needs to pay Inheritance Taxes but has not yet filed the Inheritance Tax Return, the title company may hold the proceeds in their account until such time as the taxes are determined and paid, and the Inheritance Tax Waiver is recorded.

Lien - Aright to keep possession of property belonging to another person until a debt owed by that person is discharged.

Stage 09: Final Accounting/Distributions

We will now prepare a final accounting. It is for this reason that you kept such detailed notes in Stage 5.

**Note - in some cases it may be appropriate to do a partial accounting, so this stage might be repeated. However, in most simple estates we only need a final accounting.

Using the data you collected as you were paying debts/expenses and martialing the assets (Stage 5) we will compile a final accounting.

This accounting will be circulated to the beneficiaries/heirs along with two documents to sign.

1. Approval of Final Accounting. Signing this document states that the beneficiary/heir was presented with the accounting and finds it acceptable.
2. Refunding Bond and Release. Signing this document acknowledges the amount of money the beneficiary/heir is to receive. It also states that, should some unknown debt arise, if need be, they will return a prorated share of their distribution to the estate to pay the debt.

Beneficiaries who only received personal items from the estate (ones specified in the will) also need to sign a Release and Refunding Bond, though they do not need to approve an accounting.

The Refunding Bond and Release will be filed with the Surrogate, who will then officially close your file as far as the courts are concerned.

For personal items given to other family members, we do not need a formal Refunding Bond and Release, but we will ask for acknowledgments from each person.

After these signed documents are received by all the beneficiaries and the Refunding Bonds and Releases are filed, final distributions can be made.

Sometimes we hold back a small amount of funds just in case something comes up, and a few months later we will distribute those funds. We do not usually require a new Refunding Bond and Release for this.

Stage 10: Closure

After everything is done, you may still need to file a final Estate Income Tax Return. Again, we recommend engaging an accountant for this.

Once you file these taxes and receive a refund (if applicable) as well as pay any other final expenses that came up (using the funds we held back in escrow), the remaining funds can be released to the beneficiaries.

Usually this is a small amount of money, so we do not require new Refunding Bonds and Releases.

At this point you can close the estate account.

We will return any original documents we have in our possession to you and close your file.

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By breaking down the estate administration process into these stages, we strive to provide transparency and support, ensuring you are never in the dark about what comes next. Our goal is to navigate this journey together, with your interests at the forefront.