Friday, August 23, 2019

The Mystery Of Probate

LAW MATTERS

The first question many ask while preparing a Will is why does a Will have to go through probate? The answer to that question is a historical journey through the laws we inherited from England.

In early England, the King owned all. Around 1,000 A.D., the concept of feudalism was established under the doctrine of tenure. Under tenure, one could only own an interest in land subject to the ownership of a superior person. The King had given use rights to lords in exchange for service. All property rights derived from the King as the ultimate lord. Ownership rights could pass to one’s heirs, but when someone died without heirs, the land reverted to the sovereign lord.

The Statute of Wills in 1540 granted everyone except married minors, infants, idiots and persons of unsound mind power to leave their interests in land by a Will. That law passed through to the colonies and ultimately the states (even though Louisiana operated under the civil law of France and not the common law of England).

It is through the grace of the sovereign that one is allowed to transfer assets at death. And, following the law established by the Statute of Wills, that means a Will must go through probate.

Florida’s probate statutes and rules create a detailed system for probate. They create three types of probate proceedings.

In very small estates consisting of personal property only with assets that are either exempt from creditor claims or do not exceed a total of deferred funeral expenses and reasonable and necessary medical and hospital expenses of the last 60 days of illness, the estate may be handled via disposition without administration. That process is begun by informal application through affidavit letter or otherwise by an interested party. If the court is satisfied the estate meets the criteria, the court by letter or other writing under seal of the court may authorize payment or disposition of the personal property.

Summary administration may be used when an estate does not exceed $75,000 or if a decedent has been dead more than two years. After two years, creditor claims are barred, so the procedures of more complex probate are not required. Summary administration requires little more than filing a petition, notice to creditors and a proposed order distributing assets and closing the estate. If there are no creditor issues, summary administration can be completed within a matter of weeks. If creditors are involved, the notice period can extend summary administration to as long as six months. It is a relatively inexpensive process designed for speedy conclusion.

Formal administration is required for all other estates. It is the process known as probate to most people. Formal administration is more detailed, cumbersome and takes more time.

Formal administration is begun by filing a petition for administration signed by an interested party. The interested party can be anyone with an interest in the estate, including a beneficiary, creditor or someone designated in the Will to serve as a personal representative (also known as executor in other states). Notice to others of filing the petition for administration is only required if the petition asks the court to appoint a personal representative who is not appointed by the Will or is not otherwise entitled to preference in appointment. The notice must be to everyone entitled to preference in appointment equal to or greater than that of the person named in the petition.

The Will and death certificate must either accompany the petition or be previously filed with the court.

Most Wills are self-proving, which means they have been executed with two witnesses and a notary in accordance with the Florida requirements. If not self-proving, oath of witness to the Will is also required unless the witnesses are unavailable. If the witnesses are unavailable, the Will can be admitted to probate upon the oath of the personal representative or another person.

If the court finds the filing is in proper form and content, the court will issue an order admitting the Will to probate and appointing the petitioner as the personal representative subject to filing of an oath and designation of a resident agent for service of notices and process. In many cases, the court will also require a bond be posted by the personal representative. When these items have been filed with the court, the court will issue letters of administration, which gives the personal representative authority to act on behalf of the estate.

The personal representative’s job is to gather the decedent’s assets and pay any bills which are required to be paid. As part of that process, the personal representative is required to give actual notice of probate to all known creditors and publish notice in the newspaper to reach unknown creditors. Creditor claims must be filed with the court by the later of three months after the date of first publication in the newspaper or, if the creditor was a known creditor, 30 days after date of service of the actual notice of probate to creditors.

Creditor claims are those which would have been made against the decedent but for the decedent’s untimely death. They do not generally include costs of administration or operating the estate (electric bill for the house, repair bills and professional fees and similar expenses). Creditor claims must be filed with the court to be enforceable. The personal representative should be reluctant to start paying claims before the claims deadline. The liability for claims is not actually known until the deadline for claims expires.

Debts secured by a mortgage or other lien do not disappear if a claim is not filed. Liability of the estate to pay that debt may end if a claim is not filed, but the lien against the asset continues. That means, a mortgage holder may still foreclose if the mortgage is not paid, but will not have the ability to seek a deficiency judgment or other financial judgment against the estate if a claim is not been filed.

If the personal representative decides a claim should not be paid (i.e. it is not really a debt of the decedent or perhaps a medical bill which would be paid by insurance) the personal representative must file an objection no later than four months after publication or 30 days from timely filing of the claim The creditor then has 30 days to file a lawsuit to enforce its claim, but that deadline is usually extended by the personal representative and creditor agreeing  in writing to an extension so the personal representative can further investigate the claim or resolve payment issues.

During the course of administration, the personal representative is gathering the accounts, making sure insurances are paid, paying utilities and otherwise running a mini business of closing out the decedent’s debts, property, assets and investments. The personal representative will also file the decedent’s last income tax return and, if there is income for the estate, an income tax return or returns for the estate.

Ultimately, it comes time to distribute assets and show the court that all of the required bills have been paid. As part of that process, the personal representative may ask the court for a fee and to approve the fee of the personal representative’s attorney. By statute, the presumptively reasonable fee for a personal representative is based on the value of the estate with 3% for the first one million dollars to 1.5% for all above 10 million dollars. Presumptively reasonable attorney’s fees are similar, but drop to 1% for all above 10 million dollar estates. Both fees are subject to increase for what the statute refers to as extraordinary services.

The personal representative must also provide the court with proof that notice to creditors has been provided, file an inventory of assets and confirm that no taxes are due. Unless waived by all interested parties, the personal representative must also file a final accounting with notice to all interested parties and opportunity to object.

When these matters are concluded, the personal representative may file a petition for discharge with the court. Unless extended, the deadline to conclude an ordinary or normal probate is one year from date the letters of administration are issued.

Probate process in Florida is not really a mystery. It just requires a lot of time and attention to make sure everything gets done in accordance with applicable statutes and court rules.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.

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