Rothman Gordon: Back to Basics Estate Planning: Why A Will

Back to Basics Estate Planning: Why A Will - Part III

This series is a "back to basics" look at estate planning and have been focussing on what happens if you do not have the centerpiece of an estate plan - a Will. In "Why A Will: Part II", we discovered who the heirs of your estate will be if you do not have a Will, and this article will explore some of the problems that may arise in the administration of your estate if you fail to sign a Will.

The first administration issue associated with dying intestate (e.g., without a Will) is who will be the executor (or administrator) of your estate. Initially, if you do not have a Will, you technically will not have an executor. In the Commonwealth of Pennsylvania, if you do not have a Will, the person who will administer your estate is called an Administrator, not an executor.

Pursuant to Pennsylvania law, the person(s) entitled to serve as the Administrator are (in the following order): (1) those entitled to the residuary estate under the Will, (2) the surviving spouse, (3) those entitled under the intestate law as the register, in his discretion, shall judge will best administer the estate, (4) the principal creditors of the decedent at the time of his death, or (5) other fit persons. As you can see, the Administrator of your estate can be anyone from a beneficiary to a creditor of your estate. Moreover, if beneficiaries of your estate are minors, then this will further complicate the decision as to who will be granted the right to serve. Also, you, personally, may feel that one or more of the potential administrators should not be placed into that type of fiduciary position due to "limitations" or other "shortcomings" of that individual.

A Will solves all of these problems since it allows you to name the appropriate individual(s) and/or bank or trust company to administer estate, and to also not include those individuals with the shortcomings.

Another problem that arises when you do not have a Will is the creation of an unnecessary expense - the posting of a fiduciary bond. Pennsylvania law provides that unless your Will specifies otherwise, an administrator of your estate could be required to post a bond for the faithful performance of the administrator's duties.

Some counties require a bond equal to 125% of the value of your Probate Assets - and the charge is an annual charge for each year the estate is opened. For example, if your Probate Assets are valued at $500,000, the bond would need to be issued for $625,000 and would cost around $1,650 per year.

In Part IV, we will continue to discuss the additional costs and problems encountered in the administration of an estate when there is no Will - specifically how much court intervention is required when no Will exists and how do your heirs receive your assets.

Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm's attorneys.

We are required by Treasury Regulations to advise that this writing is not intended as a reliance opinion and cannot be used for purposes of avoiding IRS penalties.