How Jane’s Simple Estate Matter Turned into a Complicated Mess
There are many misconceptions about estate administration and probate. So often when someone asks me about it, they’ll typically tell me that their family member’s estate matter is not that complicated, that they can handle it themselves. The following is a cautionary tale for the do-it-yourselfer. Mary died without a will. She never married and had no children. She did have 3 sisters, Jane, Ann and Betsy. Betsy had died before Mary, leaving two children, Jim and John. Jane was appointed administrator of Mary’s estate and thought she could handle things herself. However, she made 2 big mistakes.
Under intestacy laws, Mary’s sisters were entitled to split her estate 3 ways. That’s where Jane made her first mistake. A family friend told her she should split the estate 2 ways, not 3, because since Betsy had died, she wasn’t entitled to receive anything. Except that, under New Jersey’s intestacy laws, Betsy’s share should have passed to Jim and John.
Then Jane made her second mistake. New Jersey has an inheritance tax payable based on the relationship of the heir to the decedent (the person who died). Siblings are Class C beneficiaries. Nephews are Class D beneficiaries. Each class has a different tax rate. So when Jane filed the inheritance tax return indicating that she and Ann were the heirs she didn’t pay enough tax.
When Jim and John realized they were entitled to receive a share of Mary’s estate they contacted an attorney who then contacted Jane. Jane had already distributed the estate assets and had already filed the tax return and paid the tax by the 8 month deadline. So, now she has a problem. Jane has to retrieve funds from Ann to then pay Jim and Joe their proper share. She also must file an amended tax return with the State and pay the proper amount of tax as well as a penalty for late payment at 10% per year.
The irony of the story is that the estate was a simple one with a few bank accounts to be administered and an uncomplicated tax return. But by trying to do it herself, Mary made mistakes that an experienced estate attorney would have recognized right away. So now it will be more complicated to fix things. A lesson learned the hard way.