CHAPTER 3
 
ACCOUNTS, AUDITS AND DISTRIBUTION
 

 
 
 
 

C.

Adjudications
     
Subsequent to the audit, the Auditing Judge files an adjudication, which is sent to counsel who have filed appearances. The adjudication is a decree of distribution and is filed in all cases where there has been a formal accounting. The Court returns the original documents (e.g., letters testamentary, trust agreement and official inheritance tax receipts) submitted with the petition for adjudication, together with a copy of the adjudication.
     
   
1.

Form of Adjudication

     
    Generally, the adjudication in a decedent’s estate recites: the date of death of the decedent; whether the decedent died leaving a will or intestate; the terms of the will, or the names of heirs and next of kin if the decedent died intestate; that letters were granted and the date thereof; and that proofs of publication of the grant of letters were submitted and are annexed to the adjudication. If credit for inheritance tax has been taken in the account and the receipt is produced, the adjudication recites that payment of the tax was vouched. If the petition included a question for the Court, a decision is rendered. In such cases there will be a definite finding of fact or a definite conclusion of law to which an aggrieved party may file exceptions (see Phila.O.C. Rule 7.1.A), an appeal, or both.
     
2.   Awards
     
    The adjudication sets forth the balance for distribution shown in the account, directs payment of all claims admitted or allowed, and makes awards to the parties entitled. The accountant is authorized to make all transfers and assignments necessary to carry the awards into effect. If there is more than one beneficiary and distribution is to be made in kind, the Court may order a schedule of distribution to be filed. See Section D. If there is an award in trust to an individual trustee, even when there is a corporate co-trustee, the Court may order a certificate of the official court examiner to be filed. Finally, the account is confirmed nisi and the adjudication is dated and signed by the Auditing Judge. If no exceptions are filed within twenty (20) days, or if no appeal is filed within thirty (30) days, the adjudication automatically becomes absolute.
     
3.   Distribution In Cash or In Kind
     
    Immediately following the recitation of the balance for distribution shown by the account, there may be a phrase reading: “composed as set forth in the account” or “composed of cash as noted in the account.” These words or words of similar import signify the type of distribution the Court has sanctioned. If the balance shown by the recapitulation in the account is composed entirely of cash, the adjudication will read, “composed of cash as noted in the account” and the distributee is then entitled to receive cash and the fiduciary may be ordered to distribute cash. If, on the other hand, the balance shown by the recapitulation in the account is composed of securities as well as cash and there is no indication to the contrary, the Court may assume that the parties in interest desire or at least agree to accept distribution in kind and the adjudication will award the balance shown “composed as set forth in the account.” This signifies a distribution in kind and indicates that the Court has exercised its discretion to make awards in kind. The parties may not then demand that the executor distribute cash. In other words, unless the parties in interest appear at the audit and demand a cash distribution, the Court may assume that they agree to distribution in kind and make awards accordingly.
     
4.   Awards “subject to distribution already made”
     
    Sometimes the phrase, “subject to any payment or payments heretofore properly made on account of distribution as shown in the account,” is used. In the account, a distribution at risk, i.e., a distribution made prior to audit, is shown in the account in the distribution section. The balance shown in the adjudication does not reflect distributions already made. Therefore, in the adjudication, it is necessary to make the awards “subject to any distribution heretofore properly made as shown in the account.” A legatee is entitled to have the Court confirm the full amount of the legacy regardless of risk distributions previously made. The credit for distributions previously made will be reflected in the schedule of distribution. A satisfaction of award may be obtained from a legatee at the time of payment and may be filed as proof of payment of the confirmed amount.
     
5.   “Leave” to Transfer Securities
     
    Toward the end of the adjudication there may appear the words: “leave is granted the accountant to make all necessary transfers and assignments.” This is a general authorization for the accountant to distribute the estate. When the accountant is the executor, the Court usually authorizes the executor to make distribution. In such case the adjudication would be more specific: “Leave is hereby granted the accountant, as executor of the will of X, deceased, to make all necessary transfers and assignments.” This enables the executor to make the transfers necessary to carry awards into effect.
     
6.   Award Subject to Unpaid Inheritance Tax
     
    Immediately following the clause in the adjudication which recites the balances shown by the account, the so called awarding paragraph may include the phrase, “subject to payment of inheritance tax as claimed in such amount as may be found to be due.” At the audit a representative of the Inheritance Tax Division routinely enters an appearance. When the accountant has not obtained the final inheritance tax notice of assessment and receipts for balances due, the representative will request that the award be made subject to such additional inheritance tax. Even if a final receipt has been obtained, this request may be made because of administrative and communication problems within the Department of Revenue. The Court may delay the audit until after an inheritance tax return has been filed with the Register. Frequently the Court awards the balance shown in the account although the tax has not been paid in full. In such case, the award is made subject to the payment of such taxes as may be due. The accountant must pay the inheritance tax after the adjudication has been filed. The payment of additional tax should be reflected in the schedule of distribution. If a schedule of distribution is not ordered, the original receipt for the payment of the tax will evidence the payment of the tax.
     
7.   Reserve for Unpaid Federal Estate Tax
     
    Where, as is often the case, federal estate tax has not yet been finally settled at the time of the audit, the accountant should make a generous estimate of any additional tax due and request the Court to reserve that amount from distribution, with leave to distribute without further accounting any of that reserve not required for tax payment. If the request is reasonable, the adjudication will authorize the accountant to withhold the fund, pay the tax when duly assessed, and distribute the excess to the parties entitled thereto.
     
8.   Exceptions and Appeals
     
    Exceptions are governed by Pa.O.C. Rule 7 and Phila.O.C. Rule 7.1.A.

A party aggrieved by an adjudication or by a non-interlocutory order or decree may file exceptions within twenty (20) days, or may instead take an appeal to the Superior Court within thirty (30) days. See Pa.R.A.P. 903. Filing exceptions is no longer a prerequisite to preserving issues for appeal. If exceptions are filed, they must be in writing and set forth specifically the alleged errors of the Auditing Judge.

A single aggrieved party who files exceptions may not thereafter take an appeal until disposition of the exceptions. If there are multiple aggrieved parties, any of them may take an appeal within thirty (30) days, even if another party has already filed exceptions. In such case, the already-filed exceptions become a nullity, no further exceptions may be filed, and the disputed issues are effectively removed to the appropriate appellate court.

If one party files exceptions, the other parties have ten (10) days thereafter to file cross-exceptions, even if the normal twenty (20) day period has otherwise expired.

Proposed Pa.R.A.P. 311(a)(9) would permit an appeal as of right from an order determining the validity of a will or trust, effectively overruling Estate of Schmitt, 846 A.2d 127 (Pa. Super. 2004). Proposed revisions to Pa.R.A.P. 342 would clarify that an order of the Orphans’ Court Division determining an interest in realty, personalty, the status of individuals or entities, or an order of distribution, determined by that Division to be final, can be immediately appealed, effectively overruling Estate of Sorber, 803 A.2d 767 (Pa. Super. 2002).

Philadelphia Rules now provide for the Auditing Judge alone to dispose of exceptions. In most cases, exceptions are listed for argument before the Court en banc only if the Administrative Judge so orders. Only the Auditing Judge can request that the Administrative Judge refer the exceptions to the Court en banc. The Court will not entertain motions or petitions by a party for an en banc hearing.
     
9.   Review of Adjudication
     
    Even after an adjudication has been confirmed absolutely, it may be opened for the purpose of review if proper cause is shown. PEF Code §3521 provides that review is available only (i) within five (5) years of final decree, and (ii) before distribution in accordance with the adjudication is actually made. However, a failure to notify potential heirs entitled to notice of an audit is a jurisdictional defect and renders any decree of the Orphans’ Court void and the time-bar under PEF Code §3521 inapplicable. See Alexander Estate, 758 A.2d 182 (Pa. Super. 2000).

If the Orphans’ Court decree is affirmed on appeal, the Orphans’ Court may nonetheless grant a petition for review, but only as to questions not raised or passed upon on appeal. See Bell Estate, 463 Pa. 109 (1975).

The party seeking review must file a petition for a citation to all parties in interest to show cause why the adjudication should not be opened to review the particular matter in controversy. If an answer is filed, the matter is referred to a Hearing Judge who will allow or deny the petition in an opinion. If the petition is allowed the record will be referred to the Auditing Judge who will dispose of the controversy by supplemental adjudication.
 

 


 
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