A few posts ago, I discussed why things go through probate. In this installment, I want to go through more of the steps involved once we know we have assets that are going to go through probate. For the purposes of this article, I am only going to discuss a full decedent’s estate, which means there are typically more than $40,000 of probate assets (such as a house). For probate estates of less than $40,000, it is possible to use various small estate techniques that I will not discuss today.
The first step is to figure out who the person or people responsible to manage the probate estate are. This is typically going to be the personal representative designated in a will. If someone didn’t have a will, then it is up to the Court to pick someone to serve, although the Court will typically defer to a choice that the heirs make, assuming they can all agree. After filing a petition to open the estate and possibly admit the will, the Court will issue Letters. These serve as the official “deputization” of the person who is in charge of the estate, subject to Court oversight. If this designation came from the will, then the Court issues Letters Testamentary. If there was no will, then the Court issues Letters of Administration. Practically speaking, there is not a lot of difference in the authority between the two.
The next step (which technically occurs shortly before the issuance of Letters) is to figure out if the person in charge is going to have to post a bond and/or if they will be able to proceed with independent administration. In a will, it is pretty much standard procedure for the deceased person to have waived bond and expressly permit independent administration, which is done in the will. The Court will almost always honor this request. If there is no will, depending on the county, sometimes the Court will allow for a bond waiver if all the heirs consent. Some counties will require bond no matter what if there is no will. If the heirs all sign written consents, then the Court will typically allow independent administration, but if one doesn’t consent (or can’t in the case of a minor or incapacitated heir), then the estate will have to proceed with supervised administration.
Independent administration means that the Court is going to let the personal representative or executor have a lot of independent authority to manage the estate. In independent administration, the personal representative or executor doesn’t have to seek approval of each task they undertake (like selling the house or selling stock). They must report an inventory of the assets, and then they must file an accounting of what happened to the inventory assets and proposed distributions. In supervised administration, every single transaction must be approved by the Court, in advance. This is a very large inconvenience for the executor, and often results in the estate being open for much longer, and often at a much greater cost. Because of the hassle and costs, the vast majority of probate estates are handled via independent administration.
Once the Letters are issued, the next step is to publish notice to any creditors in a newspaper. This is usually done in a business newspaper, that is primarily only read by attorneys, bankers, and real estate investors. The theory behind publication is that people who feel they may be owed money by the deceased might not know they have passed away, and this gives them notice so that a statute of limitations may begin where if the creditor doesn’t properly raise their claim, they are barred from collecting. This statute of limitation is generally one year. At the same time, it is a fairly recent requirement that every probate estate must request a notification from MoHealthnet (Medicaid) that states whether the individual received MoHealthnet benefits. If they did, these benefits may have to be repaid before the heirs can receive an inheritance.
When someone passes away, it is not uncommon for the heirs and/or the personal representative to not fully know what the assets of the deceased really consist of, particularly if the deceased managed all of their own affairs up until their death. To give the personal representative/executor time to find everything, the Court will usually give the personal representative/executor 30 days to locate the assets and report back to the Court. This is called the Inventory.
In the next few posts, we will finish discussing the Inventory, and talk about the liquidating of estate assets, paying creditors, and bringing the estate to a close, including tax issues that must be dealt with.
If you have any questions about the probate process, don’t hesitate to contact our St. Charles, MO office (636) 486-9009 and let us try to help you through this problem!