Who Are the Parties in a Limited Partnership?

01 – What’s Estate Administration or Probate?

 

 

 

 

 

 

By: Barry E. Haimo, Esq.

January 22, 2016

What’s Estate Administration or Probate?

 

When a person passes away, his or her affairs have to be wound up and settled. There are three basic components of Estate Administration, or Probate, which we refer to the ABCs: Assets, Beneficiaries and Creditors. An estate is a temporary legal entity that is created in place of the decedent. It has it’s own tax identification number, pays income tax returns and must be responsibly managed, similar to the affairs of a person or business.

The process begins upon death of a person. Typically it is only needed when that deceased person dies owning property solely in his or her own name alone. This generally does NOT include assets owned jointly, assets owned by trusts and contracts with beneficiary designations, such as life insurance, annuities, and retirement accounts. The first step is to obtain a death certificate. Then you must by law retain an attorney to represent the Personal Representative of the estate. Sometimes the Personal Representative is referred to as an “Executor” in other states, such as, for example, New York. The Personal Representative is either appointed by Last Will and Testament or by Florida’s laws of intestacy under Chapter 732, Florida Statutes.  In either case, whomever is appointed by will or statute must administer the estate through the Estate Administration or Probate process.  Critically, the Personal Representative is held to a higher standard of care in performing its duties beyond mere negligence (reasonable prudent person), called a Fiduciary Duty.

The duties of the Personal Representative’s job are to address all of the ABCs that are referenced above. Please note that if an estate is less than $75,000 or the decedent has been dead for longer than 2 years, an abbreviated administration is appropriate, called a Summary Administration. Summary Administrations typically last a few months. Nearly all other estates require a Formal Administration, which can last up to year or even longer in complicated or litigious estates. For purposes of this post, we will only address a Formal Administration process.

In a Formal Administration, the process begins with the filing of numerous documents, the most important of which, are the Petition for Administration and Letters of Administration. This document sets forth the facts surrounding the need open a formal legal entity, or estate. If the Judge approves of those facts, he or she will issue the Letters of Administration, thus opening up the estate. Often bundled with the Petition for Administration and Letters of Administration are consents, waivers death certificate and the Oath of Personal Representative. This document proposes a Personal Representative based on the Last Will and Testament or by Florida statute. If the Personal Representative is qualified and the Judge approves, an Order Appointing Personal Representative is entered. Together, these documents empower the Personal Representative to get started working on the ABCs, which are explained below.

Assets:

The existence of an estate typically indicates that the decedent died owning assets in his or her name alone. Those assets must first be identified and organized. The Personal Representative must gather than assets to take possession of them if possible. They must be administered by the Personal Representative for the duration of the estate administration. Assets in an estate often include tangible personal property (jewelry and artwork, financial accounts (bank and brokerage accounts), real property (investment properties), vehicles and business interests (limited liability companies (LLCs) or corporations). Without careful planning, all of these assets will end up going through the probate process to the deceased person’s beneficiaries outright, which can be very dangerous.

Beneficiaries:

Like the appointment of the Personal Representative, a person’s beneficiaries are designated in a validly executed Last Will and Testament or by Florida statutes. In either case, the beneficiaries have to be identified and notified of the deceased person’s passing and that an estate has been opened. This is often done through a Notice of Administration, which sets forth the material facts surrounding the Estate Administration. Beneficiaries may need to be notified by publication if not known, accessible or responsive. The essence here is to provide proper notice to potential beneficiaries or other interested parties that may want to file objections to a number of critical parts of the estate, such as, for example, the validity of the will or qualifications of the Personal Representative.  Objections are then heard at a hearing and ruled on by the Judge in a relatively timely fashion.

Creditors:

One of the few benefits of Estate Administration, or Probate, is the ability to foreclose creditors’ rights to collect debts from the deceased person. Like beneficiaries, creditors must be notified directly, if they are reasonably ascertainable, or by publication, if not. In either case, they have a short window of time, 3 months after publication or 30 days following receipt of actual notice, whichever is later, to file a claim against the estate assets. Failure to timely file a claim results in them forever being barred from collecting from the estate and its beneficiaries. Creditors that do timely file claims prompt a resolution by agreement or a hearing which is ruled on by the Judge. Importantly, creditors get paid before beneficiaries receive their inheritance. Fortunately, unsecured and unguaranteed creditors’ claims can generally only be satisfied by assets that are in the estate. On one hand, this means that creditors may only collect a portion of their entitlement, if at all. However, on the other hand, this also means that there may not be anything left for the beneficiaries. *Please note that revocable trusts are outside the estate but still subject to creditors’ claims. Nevertheless, once the assets, beneficiaries and creditors are properly identified, proper notice is given and all claims have been addressed in one way or another, the Personal Representative will serve a final accounting on all interested parties followed by distributing the assets remaining in the estate to the appropriate beneficiaries with permission from the court.

This post represents a summary of the process. Each step requires paperwork, conferences, time, effort, expenses and patience. It’s like a temporary and undesired part-time job. There are always surprises in every Estate Administration; particularly in one or more of the ABCs. This is why the process can last a very long time and can be several times as expensive than planning ahead.

Please contact Haimo Law to learn more about the Estate Administration and Probate process and how to avoid it, thereby saving your family time, energy, frustration and money.

Author:
Barry E. Haimo, Esq.
Haimo Law
Strategic Planning With Purpose
Email: barry@haimolaw.com
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