Good Life

Money Matters: Estate co-executors in legal battle will need to find new lawyers

Q: What happens when my brother and I are co-executors of the estate and we have a disagreement that may go to court?

A: If two executors of an estate disagree, and if the issue can only be decided by a court, then each executor will be required to hire an attorney to represent them in the court proceeding. The attorney who is representing both of you for the benefit of the estate will have to drop out and not represent either executor.

The reason each executor will need to secure their own, new counsel is because there is a conflict of interest between the estate attorney representing either executor. Often, when executors realize that two more attorneys are going to be employed and the cost as a whole is going to be increased, a negotiated settlement is realized between them so as not to exhaust more of the funds.

Q: I am the executor of my mother’s estate and recently issued final checks from the estate to each of the beneficiaries. All but one of the beneficiaries has cashed their check. What do I do now that the one beneficiary has not cashed the check?

A: It would be a good idea if the executor would contact the one person who has not cashed his or her check, to see if there is a problem. The attorney for the estate could write a letter to the recalcitrant beneficiary and attempt to have that person cash the check. A first and final account and schedule of proposed distribution could be filed with the court to ask the court to issue an order to require the beneficiary cash the check, which will be an expensive process. An appeal to the individual could be made by the executor indicating that the executor does not want to resort to court action because it will cost too much money for the benefit of all of the parties.

If all else fails and if this goes on for a number of years, I think the next process might be to escheat the funds to the commonwealth of Pennsylvania and tell the beneficiary that his or her money is now lodged with the commonwealth.

Q: I heard that if one makes a gift of cash or other assets to a family member, then there is a gift-tax exemption for Pennsylvania taxes. Is that correct?

A: No. The exemption that you might be thinking of is one that appears on the Pennsylvania Inheritance Tax Return. Parents often make gifts of assets during the year prior to their death, and the exemption is $3,000 for each one of those gifts made by the decedent during a calendar year for Pennsylvania inheritance taxes. Thus, if a parent made a gift of $5,000 to a child in 2013 and then made one in the same amount in 2014, and died in 2014, and the death took place within one year of the first gift, then a deduction of $3,000 for the first gift and $3,000 for the second gift can be included on the Pennsylvania Inheritance Tax Return. The deduction is for each gift made to the same or different beneficiaries. Such a deduction is not related at all to federal gifts or deductions.