Many times a simple estate administration can be handled without an attorney, but there are pitfalls for the unwary. Our firm is routinely called by those that try to administer an estate on their own and run into problems or worse, receive a hearing notice from the Register of Wills. Preparing the final (or interim) accounting for an estate can prove overwhelming for some.
The Personal Representative (or “PR”) has a duty to account to the Register of Wills on a regular basis. Est. & Trusts §7-301. The PR must send notice of the filing to all interested persons. Id. An interested person is someone named as personal representative in a Will; serving as personal representative; a legatee (not fully paid); or an heir. Est. & Trusts §1-101(i). The PR must file the first account within 9 months of the date of appointment as personal representative. Est. & Trusts §7-305. The subsequent accounts (including the final account) must be rendered 6 months after the prior account. Id.
There is no set form for an account set forth in the Maryland Code or Rules. See generally Md. Rule 6-417. The account, however, must contain the following items:
- The total value of all property shown on all inventories filed prior to the account (for an initial account); and the total value of any assets retained in the estate along with any assets listed on a subsequent inventory (for subsequent accounts);
- Itemized listing of all receipts with the amount and description of the receipt;
- Total gross value of estate assets to be account for;
- Itemized listing of all payments and disbursements related to estate liabilities with the amount and description of the payment or disbursement;
- Total amount of payments and disbursements and the net estate available for distribution or retention;
- Distributions or proposed distributions including the amount of inheritance tax due with respect to the proposed distribution;
- Value of any estate assets to be retained;
- Total amount of the estate accounted for in the account; and
- Personal representative’s verification of the account and that notice was pro.
Md. Rule 6-417. (If there are no assets in the estate, an affidavit of no assets may be filed in lieu of an account. Id.). All proposed distributions must be made within 30 days of the acceptance of the account. Id.
Inaccurate Inventory
As Allan Gibber notes, “The purpose of an account is disclosure.” Gibber on Estate Administration [6th ed.], p. 655 (2018). This requires that the personal representative (or attorney) preparing the account have the required information in order to be able to disclose. Without the maintenance of proper records, it may be nearly impossible to create a proper account sufficient for approval by personal representative.
One common issue that is regularly encountered (particularly where counsel is retained after the initial opening of the estate and appointment of the PR) is an inventory that is incorrect. The entire account starts with the total value of all of the property in the estate. This information flows directly from the inventory. If the inventory is flawed, then all of the calculations stemming from that inventory will necessarily be flawed and the account will never balance.
Issues with the inventory can come from a number of different sources. First, a simple transcription error can lead to many problems balancing the final account. It is often useful to go back and review the supporting documentation and compare that to the inventory. Even if you prepared the inventory (and believe it to be accurate), it can save many frustrating hours, or a memorandum noting errors from the Register, if you review the inventory and supporting documentation in advance of preparing the final (or any) account. In addition, the review of the supporting documentation will allow you to familiarize yourself with all of the assets, so that you can properly track and account for them in the account. The inventory may be revised at any point before the estate closes. Est. & Trusts §7-204.
Second, additional property may be discovered after the initial inventory. While three months after the appointment may seem like a long time, in the context of an estate administration where it may take months for financial institutions to “review” the Letters of Administration and report back regarding various accounts, then the time may pass quickly and those assets may not be captured on the initial inventory. The process to capture these later discovered assets is to file a supplemental inventory. Est. & Trusts §7-203.
Lack of Supporting Documentation
Cash can be problematic for the personal representative’ account. While the personal representative should avoid cash whenever possible, it may be necessary especially in the context of an estate sale or one-off sale of estate assets. Where possible, the personal representative should create a bill of sale. Registers have rejected accounts where the personal representative could demonstrate a cash deposit, but could not produce a bill of sale accompanying the noted transaction.
Accounting Issues
Including pre-death income in the accounting can throw the accounting off. While it may be necessary to include this information, or it may be captured in the account statements, this income is not estate income, but rather income of the decedent. This information is necessary for preparing the decedent’s final tax return.
Administering an estate may be a difficult process with unique challenges for those who do not handle estate administration on a regular basis. If you believe that you need assistance with the administration of an estate, then call for a free consultation.
David A. (Andy) Hall, Esq.
King|Hall LLC
5300 Dorsey Hall Drive
Suite 107
Ellicott City, Maryland 21042
410.696.2405
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