We see this scenario in our office regularly. A client comes in who is the Executor of his/her mother’s estate. They felt like the estate was simple and went forward to handle it themself. Only when the final accounting of the estate gets rejected by the Clerk of Court and are told that they have to repay the estate thousands of dollars does the client decide it is time to talk with a lawyer. Not a good situation.
Estate administration is fraught with perils for the unwary. Things that may seem sensible to do while handling estate can be quite improper. At the end of each administration, the Clerk of Court will securitize every step taken by the Executor. The estate must balance out at zero to be approved. All payments, distributions, and disbursements must be documented and appropriate. Every penny of receipts has to be reconciled. If there are any improprieties or errors, the Executor can and will be held personally and financially responsible.
For example, estate funds cannot be used to pay for any expenses of the Deceased’s home after death. This includes mortgage payments, utility bills, taxes, upkeep, etc. If an Executor uses estate money for these costs, the Clerk will require them to personally reimburse the estate. Another pitfall can involve life insurance proceeds. When the child or children of the Deceased receive a life insurance check, these proceeds are not estate assets and should never be deposited into the estate’s bank account. It doesn’t matter if the intent is to divide the money equally in the end. If that money goes into the estate account, the Clerk of Court may decree probate fees of $4.00 per thousand be taxed against those proceeds. This can amount to a significant and unnecessary expense.
It’s always a mistake to start paying estate debts just as soon as the estate bank account is opened. There is a specific process in ascertaining what legitimate estate debts are going to be. There is a hierarchy for payment to creditors. Large debts the Executor doesn’t know about can show up later in the process. Guess what happens if the Executor pays the wrong creditors and the estate is not able to pay legitimate creditors as a result? Yes, the Executor will be on the hook for that shortfall.
Anyone named as an Executor or who needs to be approved as an Administrator of an estate should consult with an experienced attorney from the beginning. It’s far better (and less expensive) to have legal representation early before things go wrong, then to have to hire an attorney later to resolve problems. Hank Doyle has been working with clients in estate administrations in Raleigh, Cary, Apex, Wake Forest, and surrounding communities for over 25 years. Call The Doyle Law Offices today at (919) 228-4487 or fill out the contact form below.