Inhertance Tax

[caffeinenut]

My dad passed away in Pennsylavania and I live in New Jersey. I went to the courthouse to get short forms and found out I have to be bonded because I live in a different state. He had no will and I am his sole beneficiary. His estate only consists of a little over $5,000 in a savings account and about $1,500 in a checking account as well as a used car. The deputy estimated the value of his estate at $7,500 and told me I have to be bonded for $15,000. My question is two-fold. First, does the estate have to pay the $75 fee to be bonded as well as the $116 for court proccessing fees? Second, he had a life insurance policy of a little over $10,000. The final bill for the funeral expenses, grave opening, luncheon, moving his belongings, etc. came to about $12,000. I was told by someone that his life insurance policy doesn't have to be used for his funeral expenses and that I should be able to deduct those expenses from his estate before paying an inheritance tax, which of course would make his estate $0. Is that true?

This is all SO confusing and overwhelming...any advice would be greatly appreciated.

 

[advisor10]

1-14-2002

DEAR CAFFEINENUT:

Since your dad had no will, you will need to file papers at the probate court/county courthouse to become the administrator of his estate.

Yes, the estate can be charged for the bond fee and for the court processing fees. However if you can afford to pay these fees out of your own pocket, go ahead and do so, since that would be easier and more convenient, and you would be reimbursed later by filing a claim with the estate during the probate process.

The life insurance policy does NOT have to be reported as a probate asset, and basically, if you were the beneficiary, you can spend it any way you want to. However, it would be the morally correct thing to do and the responsible thing to do to use some of it to pay off part of the funeral bill.

When you do the accounting for the estate, it will look something like this:

ASSETS:
Savings $5,000
Checking 1,500

SUB-TOTAL 6,500

Expenses/Debts:

Bond Fee $ 75
Court Process. 116
Funeral 12,000

TOTAL EXPENSES $12,191

NET TOTAL (LOSS) <$5,691>

Assets minus expenses equals a negative balance of $5,691.00, which means that this estate is technically bankrupt and can not afford to pay all of the expenses.

You need to consider hiring the services of a local probate attorney to advise you on how to proceed through probate court and how best to handle your situation with the finances (which bills to place a higher priority on to get paid first, perhaps leaving some others unpaid). The attorney might also have access to an accountant who could advise you whether or not any estate tax is due or if any inheritance tax is due.

SINCERELY,

advisor

 

[caffeinenut]

Thank you for your advice. I have already paid all funeral expenses as well as his final utility bills. I have already filled out all the paperwork to be filed with the court in PA and just have to be bonded and pay the fee to the court for filing. I just wanted to be sure that I have the legal right to reimburse myself for all expenses I have incurred for his final arrangements and handling of his estate. I don't mind paying inheritance tax but I don't feel that the tax should be based on the estate before all of his expenses are paid. I also have to file his tax return and I am assuming that any income tax owed will also come out of his estate prior to its being assessed for inhertance tax.

Thanks again for your help.

Susan

1-14-2002

DEAR CAFFEINENUT:

Since your dad had no will, you will need to file papers at the probate court/county courthouse to become the administrator of his estate.

Yes, the estate can be charged for the bond fee and for the court processing fees. However if you can afford to pay these fees out of your own pocket, go ahead and do so, since that would be easier and more convenient, and you would be reimbursed later by filing a claim with the estate during the probate process.

The life insurance policy does NOT have to be reported as a probate asset, and basically, if you were the beneficiary, you can spend it any way you want to. However, it would be the morally correct thing to do and the responsible thing to do to use some of it to pay off part of the funeral bill.

When you do the accounting for the estate, it will look something like this:

ASSETS:
Savings $5,000
Checking 1,500

SUB-TOTAL 6,500

Expenses/Debts:

Bond Fee $ 75
Court Process. 116
Funeral 12,000

TOTAL EXPENSES $12,191

NET TOTAL (LOSS) <$5,691>

Assets minus expenses equals a negative balance of $5,691.00, which means that this estate is technically bankrupt and can not afford to pay all of the expenses.

You need to consider hiring the services of a local probate attorney to advise you on how to proceed through probate court and how best to handle your situation with the finances (which bills to place a higher priority on to get paid first, perhaps leaving some others unpaid). The attorney might also have access to an accountant who could advise you whether or not any estate tax is due or if any inheritance tax is due.

SINCERELY,

advisor