ESTATE ASSETS
1. Managing the Estate Cash
The Personal Representative should begin by making an inventory of cash, undeposited checks, coins and any other unique currency. Silver, gold and other
unique coins should be appraised, and a determination made as to whether
these constitute “cash,” or whether they are “tangible personal property” valued
in excess of face value.
Since the decedent's bank accounts will be closed shortly after the qualification of the personal representative and because cash and checks
payable to the decedent are frequently received shortly after the decedent's
death, the personal representative should open an estate checking account
immediately upon qualification. When the account is opened, the bank will need
a copy of the personal representative's Letters Testamentary. An attorney
should request copies of the monthly bank statements so that the PR can
account for all funds received by and disbursed from the estate in order to
prepare the necessary estate accountings.
The bank will request a taxpayer identification number for the estate account (not the decedent's Social Security number). If the estate account is
interest bearing, the personal representative or attorney should provide the bank
with a completed Form W-9, Request For Taxpayer Identification Number and
Certification, to ensure that backup withholding will not apply to the account.
Large amounts of cash not immediately needed to pay claims should be
deposited in high yield savings accounts or certificates of deposit (depending on
the anticipated time of distribution).
If the personal representative maintains the estate's accounts, all receipts of the estate should be deposited directly into the estate checking account with
sufficient information relating to the deposit (including the date, to/from whom
paid, the purpose and the amount). Also, disbursements of estate funds should
be made only from the estate checking account with sufficient information to
indicate the purpose or nature of such disbursements. It is particularly difficult
and expensive to balance an account to the clerk’s satisfaction when receipts or
disbursements are not channeled through the estate account or properly labeled.
2. Personal Property.
The heirs are vested with title in the decedent’s personal property
until a PR is appointed and qualified. Title vests in the PR upon appointment and
relates back to the date of death for purposes of administration. N.C.G.S. ? 28A-
15-2(a).
On the other hand, although the title to realty devised under a valid probated Will vests in the devisees and relates back to the date of death, the PR
may be required to take possession of devised real property to pay debts, taxes
and expenses. N.C.G.S. ? 28A-15-2(b).
The PR should compile a checklist in searching for assets. The attorney and PR should go over important documents of the decedent, including
income, intangible and gift tax returns, deeds, mortgages, promissory notes,
bank account statements, passbooks, certificates of deposit, stocks, bonds,
insurance policies, titles to cars, boats, etc. The attorney should also review
county as valorem tax listings for three years prior to death, review county
records for land ownership, leasehold interests, mortgages or judgment liens and
review bank and brokerage statements, canceled checks and deposit slips for
one year period prior to death. The attorney or PR should consider reviewing fire
and casualty insurance for schedule of personal effects. You can also contact
trade associations, professional associations, travel clubs, etc. of which
Decedent was a member, inquiring about group/life/accident insurance and other
membership benefits. Contact brokers, local banks, savings and loans, credit
unions, insurance companies, local Social Security office, local Veterans
Administration office, trade associations, professional associations, travel clubs
and the decedent’s employer.
N.C.G.S. ? 28A-15-12 provides that the PR may institute a special proceeding to discover any assets the PR believes are in the possession of a
third party.
The PR institutes a proceeding by filing a petition with
the Clerk of the county in which the third party resides or does
business stating under oath the reasonable grounds for the PR’s belief
that an asset of decedent is in the possession of a third party. You
may want to file copies of this proceeding in the county of record of
the estate. The Clerk may issue notice to the third party to appear
before the Clerk on a specified date which is not less than three days
after the issuance of the notice.
The PR or the attorney may examine the third party. If
the Clerk finds that the third party has the decedent’s property but fails
to show any reason for retaining possession, an order may be issued
by the Clerk requiring the third party to deliver the property to the PR.
The order of the Clerk may be enforced by proceedings for contempt
of court.
Within five days of the order of the Clerk, the third party
may appeal the Clerk’s ruling to the next term of Superior Court or to
the resident judge of the district. Prior to the appeal, the third party
must post a bond with a value of at least double that of the property.
The party against whom the final judgment is rendered will be
changed with the costs.
In reviewing the decedent’s personal records, the attorney should
determine the location of all banks, credit unions and savings and loan
associations in which the decedent had an account or a certificate of deposit and
the account numbers thereof. If there is any doubt as to whether all of the
financial institutions in which the decedent had accounts have been determined,
the attorney should send a letter to all financial institutions in the community or
communities in which the decedent lived, requesting information in this regard.
The attorney should be aware that some financial institutions, as a matter of policy, will not release account information to anyone other than the PR.
In that instance, letters requesting account information should be prepared for
the PR’s signature.
Accounts held solely in the decedent’s name are included in the
decedent’s estate and are reported on the 90-Day Inventory or a subsequent
accounting. Once the necessary information regarding certificates of Deposit
have been obtained, the attorney should request that they be redeemed. The
timing of the redemption request will depend on the liquidity needs of the estate,
the interest rate the funds are earning, and the estimated time for distributions to
beneficiaries or heirs.
Life insurance policies should be reviewed to determine if the insured decedent owned the policies. If the decedent had no incidents of
ownership, the proceeds will not be included in the gross estate (unless the
ownership had been assigned within three years prior to death or the estate is
the beneficiary). However, full disclosure is required on the estate tax return.
If the decedent’s estate is the beneficiary of insurance on the decedent’s life, or if a third party who is designated as the beneficiary
predeceases the decedent and no contingent beneficiary is named, the proceeds
are usually assets of the probate estate and will normally pass as part of the
residuary estate. However, the insurance policy should be carefully reviewed to
determine the correct recipient of the proceeds.
Policies which the decedent owned on another person’s life are also assets of the decedent’s estate for probate and for estate tax purposes. The
insurer will provide the date of death value of insurance the decedent owned on
the life of another on Part II of IRS Form 712. Please note that the face value of
the life insurance policy is not its value if the insured survives the decedent;
however, if the insured is terminally ill, the IRS could argue that the value of the
policy is closer to the face value.
Under certain circumstances, the decedent’s estate may be entitled to payment or to noncash benefits from certain governmental agencies.
If the decedent was receiving Social Security checks at the time of his death, the attorney should contact the local Social Security office to
rddetermine if the final check should be returned. Social Security is paid on the 3
day of each month for the preceding month, and the decedent must have lived
for the entire month to be entitled to such check. For example, if the decedent
died on June 30, the check received on July 3 must be returned. It should be
determined if Social Security checks were deposited directly into the decedent’s
bank account and if so, such direct deposits should be discontinued.
If the decedent contributed to Social Security, his surviving spouse will be entitled to a lump sum Social Security death benefit, and survivor benefits
may be payable to member of the decedent’s family. It should be noted that
funeral homes are not eligible for the benefit. However, the lump sum death
benefit may be assigned to the funeral home. The eligible beneficiary should
contact the local Social Security office and make an appointment to claim the
death benefit. The beneficiary should take a certified copy of the death certificate.
If the decedent was a veteran, dependency and indemnity compensation may be payable to the surviving spouse or the decedent’s children
if the death was service connected, or in certain other limited circumstances.
The local Veterans Administration office should be contacted to determine such
benefits.
If the PR paid the funeral expenses, the PR may be entitled to a lump sum death benefit up to a maximum of $300 if the decedent died in a
Veterans Administration hospital or was receiving disability payments.
Application for this benefit is made on VA Form 21-530, Application for Burial
Benefits.
The PR may collect an amount up to $150 as a plot or interment
allowance if the decedent was not buried in a national cemetery. However, the
plot allowance is generally available only to wartime veterans or to veterans
discharged from duty for disability incurred or aggravated in the line of duty.
Application for the benefits should also be made on VA From 21-530.
A deceased veteran may be entitled to reimbursement for a headstone or grave marker, or deceased veteran may be entitled to a headstone
or marker. A deceased veteran may also be entitled to a U.S. flag for burial
purposes.
If the decedent was covered by Medicare and the PR has received a claim for medical bills, the PR should contact the doctor-claimant to determine
if an assignment of the amount of available Medicare benefits to the doctor-
claimant will be accepted in full settlement of the claim, whether or not the claim
exceeds the benefit. If the doctor-claimant will accept the assignment Patient’s
Request for Medicare Payment should be completed and submitted to Medicare.
Payment will be made by CIGNA directly to the doctor-claimant. If the doctor-
claimant will not accept the assignment, the PR must pay the claim, complete
Request for Information Medicare Payment, and submit it, together with the bills
marked “paid” by the claimant and a copy of the PR’s Letters to CIGNA.
Contact each insurer of the decedent to inquire about possible premium reimbursements. Not only should medical and hospitalization insurers
be contacted, but also the insurers for automobile insurance policies, disability
income policies, fire and casualty insurance policies, etc.
The estate or survivors of the decedent may be entitled to benefits under various kinds of insurance such a disability income policies, fire and
casualty insurance and automobile liability insurance where loss occurred prior to
death. All policies of the decedent should be reviewed. Medical and
hospitalization insurance policies should be reviewed for the possibility of
incidental life insurance benefits. If the decedent’s death occurred in someone
else’s automobile, consideration should be given in collecting any medical
insurance under such other person’s automobile insurance policy, and a wrongful death suit should be filed if appropriate. In addition, the Decedent may have had
credit life insurance on credit card amounts or loans for which the PR should
apply. The decedent’s past and present employers should be contacted to
determine any employment-related insurance benefits.
The decedent may be entitled to income tax refunds and the attorney should review the decedent’s income tax returns, and other tax returns,
if any, for years not barred by the statute of limitations to determine if the amount
of taxed paid is correct and whether or not there is a refund due. To obtain a
federal income tax refund, IRS form 1310 should be filed together with IRS Form
1040. An amended income tax return, Form D –400X, should be filed with the
North Carolina Department of Revenue to claim a refund on a prior income tax
return.
If there is a federal income tax refund of $500 or less payable to the decedent and the surviving spouse with respect to joint returns filed by them, the
refund is the sole and separate property of the surviving spouse. N.C.G.S. ? 28A-
15-6. If there is a federal income tax refund of $250 or less, exclusive of interest,
payable to the decedent with respect to a separate return filed by the decedent,
such refund is the sole and separate property of the surviving spouse. N.C.G.S.
? 28A-15-7. N.C.G.S. ? 28A-15-8 allows a state income tax refund of $200 or
less, exclusive of interest, to pass to a surviving spouse from the decedent’s
North Carolina income tax return. One-half of federal and North Carolina refunds
in excess of the above-stated amounts belongs to the surviving spouse and the
remainder to the estate. N.C.G.S. ? 28A-15-9. If a refund check should be
divided between the spouse and the estate, either one may deposit the check
and write a check for the appropriate amount to the other.
The debtor on any note or secured obligation due to the estate should be contacted, advised of the decedent’s death, and told to whom and at
what address future installments should be made. The financial condition of the
debtor should be reviewed. If the debt is secured, the attorney should (a) confirm the perfection of the security interest; (b) conduct a physical inspection of the security or confirm that the PR has done so; (c) confirm that the security is adequately insured against damage or destruction; (d) confirm that all ad valorem taxes due on the security have been paid; and (e) obtain the current value of the security. The PR should consider whether to negotiate for full payment of the note. Factors will include the financial condition of the debtor, the payment history, if known, outstanding balance and the term and interest rate of the note. If the note is distributed to a beneficiary, the attorney will need to prepare an assignment from the estate of the beneficiary.
If there if a question as to whether there are any secured notes due
to the Decedent, the PR should review the Uniform Commercial Code (UCC) filing at the local Register of Deeds and the Secretary of State’s office.
For estate tax purposes, the attorney should consider whether the
note should be appraised and whether a discount is appropriate. The date of death and alternate valuation date values should be obtained.
The attorney should obtain a generalized description of all of the
decedent’s household furnishings and personal effects. If the decedent had any valuable items such as antiques , jewelry, watches, silverware and china separately insured, the values at which they were insured is a useful starting point in the valuation process. However, current appraisals should be obtained on any articles of artistic or collectible value in excess of $3,000 or any collections whose artistic or collectible value combined at date of death exceeded $10,000 (such appraisals will need to be submitted with the estate tax return, if any). Insurance policies should be reviewed to determine that the assets are adequately insured. Early distribution of household furnishings and personal effects should be considered in order to avoid the costs of insurance and safekeeping. In many instances, household furnishings and personal effect will be specifically bequeathed in the Will. If they are not specifically bequeathed, the
PR should consider the tax impact of distributing these assets. The PR should obtain a receipt and release for all property distributed to a beneficiary.
If the decedent owned the usual dwelling house occupied by the
decedent’s surviving spouse at the decedent’s death, the PR should not sell or lease any household furnishings located in the house until the expiration of the time within which the surviving spouse can elect a life estate in the dwelling and fee ownership of the household furnishings in lieu of an intestate share pursuant to N.C.G.S. ? 29-30(b). See N.C.G.S. ? 28A-16-3. If personal property is sold, the PR should execute a bill of sale.
Unless otherwise provided in the decedent’s Will, the PR is
authorized to continue the farming operations of the decedent until the end of the current calendar year, and until all crops grown during that year are harvested. The net income from the farming operations shall be personal assets of the estate. Any indebtedness incurred in connection with the farming operations after the date of death is preferred over the claims of any heir, legatee or general or unsecured creditor of the estate. N.C.G.S. ? 28A-13-4. Unharvested crops of the decedent, remaining ungathered at death, belong to the PR or collector and are included as personal assets of the estate, unless the Will provides that the crops go to the devisee of the land. N.C.G.S. ? 28A-15-1(d).
The PR will need to itemize agricultural crops which are
unharvested or harvested and stored at the time of the decedent’s death. An
itemization of livestock and farm equipment must also be made. Any contracts with the North Carolina Department of Agriculture or the United States Department of Agriculture (including crop allotments and conservation agreements) should be reviewed and appropriate persons contacted. Any lienors should be advised of the decedent’s death and disposition of such liens should be determined. The PR should execute a bill of sale if any crops, livestock or equipment is sold. Distributions of such property to a beneficiary should be evidenced by a receipt and release executed by the beneficiary.
If a farm name has been registered under Article 4 of Chapter 80 of
the General Statutes, then the registered name of the farm passes to the
purchaser of the whole farm, but if the purchaser buys only a portion of the farm,
the registered name passes only if it is stated on the deed or conveyance.
N.C.G.S. ? 80-38.
The attorney should obtain any governing instrument, including
wills, trusts or other documents, under which the decedent held a beneficial
interest, present or contingent, as a fiduciary or beneficiary of an estate or trust.
Upon review of these documents, the attorney should advise the PR as to
whether the decedent owned or had a power with respect to any such interest at
the time of his death which requires that such interest be included in his estate
for death tax purposes. If the decedent had a remainder or reversionary interest,
the value of which is includable in his estate for federal estate tax purposes, the
PR should determine if the payment of the federal estate tax attributable to the
inclusion of the interest in the estate may be deferred for federal estate tax
purposes under I.R.C. Section 6163.
If the decedent was a lessee of real or personal property, the
lessee’s interest in the lease is considered personalty, is a probate asset and
belongs to the PR for purposes of administration. If the decedent was a lessor,
the PR should take steps to insure rents are collected and the lease is enforced,
including notifying the lessee of where to send rental payments.
The PR may take custody of gifts causa mortis when and as
needed to satisfy claims against the estate but they are available for distribution
to the heirs or decisees.