Monday, July 28, 2014

Estate Administration Part 1: How to Apply for Letters of Administration


Ordinarily, a person specifies in his or her Will who they would like to deal with the matters of their Estate when they pass away. This is often a spouse, relative, or close friend—someone who the person trusts to act in the best interests of their Estate and their family. The person named in a Will to be responsible for the decedent’s Estate is called the “Executor.”

Sometimes, however, a person will pass away without first creating a Will, or their Will may not appoint an Executor. When this happens, somebody must request that they become “Administrator” of the Estate. Generally, this is a relative of the decedent. The Administrator handles the Estate in almost precisely the same way an Executor would, and regardless of title, the responsibility to act in the best interest of the Estate and its heirs is the same.


What is Estate Administration?
Estate Administration is the process of handling a decedent’s assets, paying bills, filing taxes, and ultimately transferring assets to heirs. If a decedent dies without leaving a Will, distribution of assets and who shall administer the Estate is determined by state law. The person who is “in charge” of the Estate is called the “Administrator.”

Why do I have to apply to be Administrator? Can’t I just distribute the assets of the Estate how I know my loved one would have wanted me to?
Unfortunately, this is not the case. If the decedent had assets belonging solely to him or her without named beneficiaries, these assets must be distributed according to New Jersey’s laws of intestate succession. “Intestate” refers to the fact that the decedent passed away without leaving a Will. In order to ensure that the Estate is properly administered and that any taxes owed by the Estate are paid, a family member of the decedent (or other interested party) must apply to become Administrator.

When can I apply for to become Administrator?
You must wait until the fifth day after the decedent dies to apply to be appointed Administrator. If there are no complications, you will be appointed Administrator within 10 days thereafter. The Court will issue a Surrogate Certificate, a/k/a Letters of Administration, confirming that you are the “personal representative” of the Estate.

Who has the right to administer the Estate?
The “next-of-kin” of the decedent in order of degree may apply to be Administrator. The “pecking order” is:
A.    Surviving spouse, domestic partner, or civil union partner of the decedent
B.    Children of the decedent
C.    Grandchildren of the decedent
D.    Parents of the decedent
E.    Siblings of the decedent
F.     Nieces or nephews of the decedent
G.    Grandparents of the decedent
H.    Aunts and uncles of the decedent
I.      Cousins of the decedent
J.      Step-children of the decedent

The person applying must prove that they are the highest person in this “pecking order.”


Where do I apply?
You apply by submitting the required forms (listed below) at the Surrogate’s Court of the county in which the decedent was domiciled at death. (This is where the decedent called “home.”)

How do I apply?
You will have to fill out and/or sign the following paperwork:
·       Application for Administration—this contains information about you and others entitled to inherit from the Estate.
·       Authorization to Accept Service of Process—allows the Surrogate to accept Service of Process on behalf of the fiduciary.
·       Administrator Qualification—in which you certify that you will administer the Estate according to law.
·       Child Support Verification—acknowledges that you have been advised of your obligation to determine if you or any beneficiary have any child support arrangements or owe child support prior to disbursing funds.

Because the decedent left no Will, you will most likely be required to apply for a Surety Bond as the Administrator of the Estate.

What is a Surety Bond?
A Surety Bond protects the creditors and beneficiaries of the Estate from any fraudulent action on the part of the Administrator. The Bonding Agency is essentially insuring that the Administrator will fulfill his or her duties and act lawfully when administering the Estate.

The Surety Bond premium is linked to the size of the Estate; the higher the Estate’s value, the higher the premium to bond the Administrator will be. Note that if your credit is bad, you may not qualify for a Surety Bond. The Estate pays for the cost of the Surety Bond, which must be renewed annually until the administration of the Estate is complete.

What happens once my application is processed?
Assuming your application is approved, the Surrogate will issue you Letters of Administration, which authorizes you to act on behalf of the Estate. You will also receive Short Certificates, which you will use as proof of your authority when transferring or selling the decedent’s assets.

When am I finished as Administrator? How do I close out the Estate once Administration is complete?
After all Estate Matters are complete (see Discussion Regarding Handling an Estate), we will prepare a Consent, Release, and Refunding Bond (“CRRB”) to be signed and notarized by each beneficiary of the Estate. Simply stated, this means that the beneficiary “consents” to your actions as Administrator, “Releases” you from further obligations as Administrator to the beneficiary, and promises to “Refund” a pro-rata share of an unexpected debt from their inheritance. You then file the Executed CRRBs with the Surrogate, and the Surrogate will then issue a Certificate of Release. You will submit this to the Bonding Agency, and they will release you from your surety bond. You may then distribute the decedent’s estate pursuant to the laws of intestate succession.