Estate Assets - Elder Law Firm of Andrew Olsen

By Rita Simmons,2014-07-09 22:14
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Estate Assets - Elder Law Firm of Andrew Olsen ...


    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-


    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


    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


    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


    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


    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.

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