How to Administer an Estate
Whenever a person dies, his or her estate needs to be collected, managed, and distributed. Estate administration involves gathering the assets of the estate, paying the decedent's debts, and distributing the assets that remain in the estate.
In recent years, state legislatures have attempted to reduce the complexity of estate administration. Currently, about 20 states have adopted some version of the Uniform Probate Code (UPC), which was designed to simplify the estate administration process and provide similarity among probate laws from state to state.
Which State Law Applies?
In some cases, an estate may need to be administered in more than one state. Generally, the state in which the decedent resided at the time of death will be the state where the decedent's estate is probated. However, state law governs the transfer of real estate, so if the decedent owned real estate in another state, it may be necessary to do an ancillary proceeding to probate that one piece of property in the state where it is located. An ancillary proceeding is a scaled-down probate proceeding, which governs only the assets located in that state. In some instances, it may be necessary to consult two attorneys, one in the state where the decedent lived and another attorney in the state where the decedent owned real estate.
Probate: Formal or Informal
In many states, a probate proceeding can be either formal or informal. An informal probate proceeding usually involves filing some basic paperwork, having the court appoint someone to manage the estate, paying the debts, distributing the assets, and having the court approve the distribution. The court's role may never require a hearing, but only a review of the papers filed.
In other instances, such as when a will is disputed, a formal probate proceeding may be required. A formal proceeding involves more court oversight and usually requires one or more court hearings. In some states, a probate proceeding can be formal in parts and informal in others. For example, the matter may start out formally, with a court hearing to appoint the personal representative, but end informally, with a paper filed with the court detailing how the assets are to be distributed.
Managing the Estate: Personal Representatives
The first task in a probate proceeding is appointing a responsible party to manage the estate. This person is usually called the personal representative. In some states this position is known as the "executor." The personal representative may be an individual or a company, such as a bank. The personal representative may have been nominated by the decedent in the will. If there was no will, the court will usually appoint the surviving spouse or another family member. There may be more than one personal representative named.
Inventorying the Estate
After being appointed, the personal representative is expected to document all of the decedent's assets. This documentation is often referred to as the inventory. The personal representative must also inform the decedent's creditors that the decedent has died. If the decedent's probate assets are sufficient to pay the creditors, the personal representative will pay them from the estate. If the probate assets are insufficient, the personal representative may need to obtain court approval to determine which creditors should be paid.
Distributing the Estate
If there are any assets left after the creditors have been paid, those assets are distributed according to the will. If there is no will, the decedent is said to have died intestate. State laws vary as to how to distribute the assets of an intestate decedent.
The personal representative will also file any necessary tax returns. If the estate is owed any money, the personal representative may need to bring a lawsuit in order to collect it. If the will is contested, or if there is any other dispute over how to distribute the estate assets, the personal representative may have to "defend" the will in a probate proceeding.
Avoiding Probate Through Small Estate Administration
If the decedent owned few assets, it may be possible to avoid the probate process. In many states, a "small estate administration" is available. Usually, in order to qualify for a small estate administration, the decedent's assets must not include real estate and must be worth less than a threshold amount determined by the state. If a small estate administration is applicable, the parties who are entitled to receive the decedent's assets may collect those assets by way of an "affidavit," a sworn statement that is filed with the court. Even in a small estate proceeding, though, the decedent's creditors may need to be paid from the assets before any estate assets are distributed.