Overview of the Estate Process

Overview of the Estate Process

The first step in a regular estate proceeding is to open the estate. The Executor or Administrator files a petition with the Court or Clerk of Court and the Court or Clerk appoints the Executor/Administrator by issuing Letters of Appointment which authorizes the Executor/Administrator to act on behalf of the estate.

Next, notice is published in a local newspaper two consecutive weeks. An estate cannot be closed until four months from the second date of publication. Realistically, most estates take five months or more to close depending on their complexity.

Within 90 days from the date of death an Inventory is filed showing the date of death values of all assets held by the Decedent. Probate files are located in the Clerk of Court’s Office in the county in which the Decedent passed away and this file is a public record.

In estates there are two types of non-income taxes with the first being Iowa inheritance tax and the second federal estate tax. In Iowa there generally is no inheritance tax for parents, spouses or lineal descendants of the Decedent. Generally there is no federal estate tax due as long as an estate does not exceed $5,350,000.00.

An estate is a legal entity and is required to file state and federal income tax returns. Once the Iowa fiduciary tax return is filed we must wait for an income tax certificate of acquittance which can take weeks or months.

Close to closing an estate we prepare a Final Report which is a summary of where the estate started, what was done and includes a proposed distribution. Each interested party will receive a copy of the Final Report.

Once all tax clearances are filed and all beneficiaries or heirs have either consented to the Final Report or the time for filing objections has passed, the Court approves the Final Report and the estate is closed.

The tax consequences for beneficiaries or heirs come in the form of a K-1 from the final fiduciary return. Generally, inherited property is not taxable as income. Exceptions to this include certain retirement accounts and annuities.