Phase Five: Distributions
Phase Five, the distribution phase, involves distributing the assets to beneficiaries according to the terms of the will or pursuant to state intestacy laws if there is no will. This phase may also include preparing and executing any necessary deeds or documents to transfer assets to the beneficiaries.
Preliminary Distributions and Advances vs. Final Distributions:
In the context of estate administration, preliminary distributions and final distributions refer to the distribution of assets to the beneficiaries of the estate at different stages of the process.
Preliminary distributions refer to the distribution of assets to the beneficiaries before the estate is fully settled and closed. These distributions may be made for the purpose of paying off debts or taxes, or to provide funds for the beneficiaries to cover living expenses while the estate administration is ongoing. These distributions are generally made after the probate process and the asset discovery phase. The executor will have to get the court's approval before making preliminary distributions.
Final distributions, on the other hand, refer to the distribution of assets to the beneficiaries after the estate has been fully settled and closed. These distributions are typically made after all taxes and debts have been paid and all necessary documents have been filed. The final distributions are made according to the terms of the will or state laws if there is no will. Final distributions are usually made after the completion of the estate closure and settlement phase, which means that the estate administration process is complete and the executor can be released from his/her responsibilities.
In summary, preliminary distributions are made before the estate is fully settled and closed, usually to pay off debts or taxes, or to provide funds for the beneficiaries, while final distributions are made after the estate is fully settled and closed, according to the terms of the will or state laws, and the process of estate administration is completed.
Phase Five is also usually the point in the administration where it is best practice to prepare and obtain signatures on any agreements and/or releases as it pertains to the estate. This is an important step in the process in order to mitigate risk as it relates to how the estate administration was handled by the executor and those assisting him/her/them in the process.
There are many different types of releases that are used during an estate administration. Depending on what state you are in (we are looking at you, New Jersey), a formal release document may actually be required by the court prior to closing the estate. Generally speaking, however, a release is a legal document that is signed by the beneficiaries or heirs of an estate, waiving their right to any further claims or disputes against the Executor, the estate, and its assets. The release is typically given in exchange for the distribution of their inheritance, and serves to finalize the settlement of the estate and prevent any future legal action.