What to do if my older brother died without a Will and I was appointed administrator of his estate?

My mother would like his estate account split between myself and my younger brother. The account will be approximately $500,000 when all is said and done. Can this money be distributed by me as the Administrator or must my mother officially “own” the estate and then give it to her 2 children? What are the tax implications for both my mother and her children? f my mother has to first be distributed the account money, will this be considered a gift on her part to her 2 remaining children and will she be penalized for the large gift? Will my brother or I be required to pay tax on this money since I am not a direct beneficiary?

Asked on November 16, 2012 under Estate Planning, New York

Answers:

Catherine Blackburn / Blackburn Law Firm

Answered 8 years ago | Contributor

There is no question that you need a lawyer to handle this matter for you.  In my state, Florida, lay persons are not permitted to administrate an estate without a lawyer.  The number of questions you ask about this illustrates the reason for requiring a lawyer.

In general, it looks like the surviving parents inherit if a child dies without a will, without a spouse, and without their own children.   Your question does not say whether your father is still living - or whether your brothers and you have different parents.  If so, everything is much more complicated (and illustrates why everyone needs a will).

Assuming your mother is the only surviving parent and all the children have the same mother and father, the process should generally be as follows.  As the Administrator of your brother's estate, you have responsibility to gather his assets into an estate account.  You will obtain a federal tax ID number for this account but may or may not owe taxes.  There should be no federal estate taxes (right now the exemption is $5.12 million, so you would not owe federal estate taxes on a $500,000 estate.  It looks to me that New York allows an exemption of $1 million but check that with a New York lawyer).  You will also investigate your brother's debts and pay those out of his assets.  After all of the assets are gathered and the debts paid, you will distribute the remaining proceeds according to New York law.  You can see why you truly must have a lawyer to help.  I practice estate law in Florida, and I would need a New York lawyer to help me.  There is no way I would try to do this myself.

I would expect that New York has a process by which your mother could disclaim her right to inherit.  After that, your brother's assets would be distributed out of the estate account to you and your younger brother.  This will avoid issues with giving gifts and paying tax on them.  Without doing this, you will likely have a tax mess to clean up.

In general, estate assets are taxed to the estate and not to the beneficiaries.  Gift taxes are taxed to the giver, not the receiver.  Estate and gift taxes are set to change dramatically on January 1, 2013.  Since your brother died in 2012, the 2012 estate tax will apply, so don't worry about all the publicity about "the fiscal cliff" and changes to tax rates.

I hope this helps you understand the process.  I assume you have a lawyer to the estate - feel free to ask the lawyer or his or her staff any questions you have.  It is their job to answer.


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