FOR DISTRIBUTION PURPOSES ASSETS OF AN ESTATE ARE VALUED AS OF THE TIME OF DISTRIBUTION TO BENEFICIARIES

• Tuesday, March 3, 2020
• Category: Wills, Trusts and Estate Litigation

   Beneficiaries shared in the gain or depreciation of an asset during the pendency of an estate proceeding, so an asset of an estate was valued as of the time of distribution. The court ordered that one beneficiary reimburse another for her share of the partial distributions.

   Donna Smith and her sister, Debra Jenkins, were the sole beneficiaries of the estate of Donald A. Hunsicker. Smith had previously been the administrator of the estate, but the court entered an order in 2016 removing her from that role and appointing another person as administrator. The court later imposed a surcharge on Smith for her mismanagement of the estate. Smith had improperly transferred $200,000 to a different estate. The full amount was never recovered, but the remaining cash of $88,000 was eventually transferred back to the estate of Donald A. Hunsicker. The court also ordered the transfer of a vacant parcel of property into this estate. A 2014 appraisal attributed a value of $112,000 to this real property.

   In 2018, the administrator transferred the real property to Jenkins as a partial distribution from the estate. She sold the property in 2018 for a net price of $60,460.55. Smith moved to open this case to evaluate the distribution. The court noted that neither Smith nor her attorneys were included in the stipulation for distribution, so it granted Smith’s motion to open the matter.

   The parties did not dispute the assets included in the final accounting, but they disagreed regarding the valuations. Smith and Jenkins were equal beneficiaries. The surcharge against Smith, inclusive of attorney fees, was of $256,862.15. Smith argued that the appraised value of $112,000 for the lot should have been allocated to Jenkins, not the sale proceeds of $60,460.44.  Jenkins insisted that the actual sale price was the value for estate distribution purposes. The court agreed with Jenkins that the value was determined as of the time of distribution. Beneficiaries shared in the depreciation or gain of an asset prior to a final distribution. Although the court noted that if would have been if the administrator had sold the property and distributed the proceeds, the sale was an arm’s length transaction.

   In terms of the total distribution, the court found that Jenkins had received an overpayment, so it ordered her to reimburse Smith. Jenkins had also previously received a partial distribution of $35,000. She and Smith were entitled to share equally in that amount, so the court ordered Jenkins to reimburse Smith for half that amount. The court also approved the administrator’s request for an award of fees and expenses.

Ref: Digests of Recent Opinion, Pennsylvania Law Weekly, 43 PLW 135, February 11, 2020, In re Estate of Hunsicker, PICS Case NO. 20-0086 (C.P. Monroe Jan, 16, 2020)

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