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Estate administration covers the identification, collection, protection and ultimately, distribution of a decedent's assets. Estate litigation includes controversies over creditor claims filed against the estate, actions to recover estate property and will contests. Within these areas of probate law are an aggressive set of deadlines and responsibilities that help secure the orderly settlement of estates, prevent embarrassment to creditors and others, and avoid confusion in the vesting of property rights and titles that pass through probate. However, these deadlines and responsibilities also present pitfalls to the unfamiliar practitioner. Because probate law is state specific, each state's laws may vary somewhat and it is critical to research applicable state law prior to advising a client, especially with respect to any timeframes and deadlines set forth herein. Nevertheless, the general concepts are applicable to all states. The following discussion of probate practice is aimed at providing novice attorneys with background on the more common estate matters.
Disclaiming an Interest Under a Will
Disclaiming amounts, particular assets or fractions of an asset under a will may effectively minimize taxes. If a legatee disclaims his or her interest under the will, the legatee cannot control the disposition of disclaimed assets. Rather, the will directs to whom the asset will pass. If the will does not provide for a disclaimer, state law controls.
A legatee must disclaim before accepting the benefits of the bequest. For example, a legatee cannot accept an interest payment or a dividend before disclaiming funds or stock. Further, the disclaimer must be in writing and made within nine months after the decedent's death. Once made, the disclaimer is irrevocable.
Bringing a Will Contest
The time period within which a party may bring a will contest can be relatively short. For example, in Illinois, an interested party must file his or her will contest within six months from the date the order is entered admitting or denying the will to probate. Although originally set at five years, the Illinois statute limiting the time for filing a will contest has been reduced numerous times before legislature settled on the present period of six months. Further, because the Illinois will contest statute is viewed as jurisdictional rather than a statute of limitations, tolling the limitation period is significantly more difficult. The will contest statute creates the right and defines the limits of which that right may be enforced. Meaning, as a jurisdictional time limit, the running of the time limitation is not tolled by any fact not expressly provided for by the statute itself. However, in other jurisdictions, the statute imposing a time limit on will contests can be a statute of limitations, rather than one of jurisdiction, and as such, must be affirmatively plead and may be waived.
Furthermore, some states estop beneficiaries from contesting a will once a benefit is accepted. Voluntary acceptance of a benefit by a beneficiary may constitute ratification of an entire will. Thus, some courts have held that if a beneficiary accepts a bequest under a will, he may not challenge the validity of the will thereafter. Of course, there are some exceptions to this rule, but the safer play is to avoid accepting any benefit of a will if you plan to bring a will contest.
Tortious Interference with an Expectancy
Where a will contest alone would fail to provide sufficient relief, a plaintiff may choose to plead a separate count of tortious interference with an expectancy in conjunction with the will contest. The tort action may be necessary to provide a remedy for any alleged inter vivos transfers that removed probate assets from the estate. However, some states have limited the availability of this action to those instances where the remedy of a will contest would not provide adequate relief. Thus, tort actions that are duplicative of will contests will not stand in such states.
Notice in Estate Administration
In estate administration, notice "starts the clock"; it begins the countdown for bringing certain actions or claims. Notice is required to be sent or published to heirs, legatees and creditors of the estate, both known and unknown. If representing an estate, it is important to send notice as soon as allowed under applicable state law. For example, notice to heirs of a will admitted to probate allows the running of the statutory period to become a bar to future will contests of the notified party. Also, published notice to unknown creditors, or notice to known creditors, limits the time to make claims against the estate. Courts cannot close an estate until these periods have run.
Because notice required in estate administration is often made to non-lawyers, states generally require the notice to include certain information advising the recipient of his or her rights in the proceedings and advising them if those rights will lapse on a date certain. Improper notice or failure to give notice may prevent certain rights from extinguishing, such as an heir's right to challenge a will when the failure to provide notice was deliberate.
Tax Returns of the Decedent and the Estate
Executors or administrators are responsible for estate and income tax filings. In the year of death, the executor or administrator must file the decedent's federal and state income tax returns (Form1040). The executor or administrator should also verify that the decedent's federal and state income tax returns from previous years have been filed, making sure to take corrective action if deficiencies are found.
The executor or administrator should file for a federal employer identification number (EIN) for the estate if estate tax or income tax filings are required. Estate taxes are filed on Form 706 while income taxes are filed on Form 1041. Further, all outstanding tax liabilities of the decedent that may arise during administration, including property and business taxes must be paid. Federal and state law holds the personal representative liable for income and estate taxes where funds have been distributed without reserving enough to pay the various taxes. As such, the representative should be sure to create a reserve sufficient to pay the various taxes.
About the Author
Tim Ritchey is an associate attorney at Peck, Bloom, Austriaco & Mitchell, LLC, in Chicago, IL where he practices estate and guardianship administration, probate and trust litigation, real estate litigation, tax law, and estate planning.