Many individuals may have heard of the probate and estate settlement process, but are uncertain about its purpose and steps involved. In basic terms, probate is a procedure carried out by the surrogate court (probate court) to ensure that the creditors of the deceased are settled and any remaining assets are distributed to their beneficiaries.
However, the probate and estate settlement process can become complicated, particularly depending on various factors such as the complexity of assets, the number of participants involved, their relationships, and more. The added stress and emotional turmoil faced by the family during this time can exacerbate the difficulties of the process.
To avoid costly mistakes, it’s important to be aware of the common missteps that can occur during the probate and estate settlement process.
Here is a list of such mistakes to keep in mind.
No Outcome in Mind
Starting the probate process with a clear end goal in mind can simplify the journey and provide direction. Having a set outcome in mind, such as obtaining peace of mind, settling debts and taxes quickly, resolving issues with heirs, maximizing the value of the estate, or simply wanting to get it over with, can help ensure that everyone is on the same page and decisions are made with confidence and support.
Not Educating Yourself on the Probate Process and Deciding if You Need / Want a Lawyer
You can educate yourself about the process. You will recognize situations where you are in over your head. It does make a lot of sense to talk to an attorney about the process and see what he/she thinks might be appropriate in your situation. You may then decide that you can handle this “pro per” meaning without a lawyer and represent the estate yourself as you go through the probate process.
You might decide to use an attorney because your case might be slightly complicated or the estate is not in your hometown or state or you simply have no time on your hands. Financial planners, CPA’s, local realtors, contractors and estate planning firms are experts in their perspective field and can give you specialized knowledge which pays off in both the short run and long term.
Waiting Too Long to Begin the Probate Process
As time goes by taxes add up, creditors become pushier and heirs more impatient. Losing a loved one is devastating and moving forward can at times almost seem emotionally impossible. However, waiting too long will add pressure and demands from others to your mourning process. Give yourself time to mourn but also realize that the longer you wait the greater the demands.
Failing to Quickly and Properly Take Control of and Protect Estate Assets
This is especially critical for real estate, which must be properly insured, secured against break-ins if vacant, and protected against loss for nonpayment of taxes and mortgages. If you are not in the same city or state this can become a challenge for you, especially if curb appeal suffers and squatters take over. A good realtor that understands your probate needs can also help you maintain the property by using people in his/her network. You must take exclusive control of an estate’s cash. Do not permit another person to have access to an ATM, debit or credit card, bank account.
Failing to Prepare an Accurate Inventory of Assets
If the deceased’s estate has debts or the deceased owned real estate some form of probate estate administration will be needed. Preparing an accurate inventory of assets, which should only reflect assets that have actually been collected and placed under the control of the administrator or executor, is important. One must account for everything and understand where and how things will pass to the deceased’s heirs either under the Will or by intestate succession. For example, does the estate include jewelry, collections or family heirlooms to be passed on? Are there oil, gas or mineral rights or royalties that need to be disposed of?
GOT QUESTIONS… JUST CLICK HERE!Not Knowing Your Options When It Comes to Selling Real Estate
Real Estate is the biggest component of the estate’s assets. Depending upon your desired outcome and goals you should know that you have options in real estate. The basic and straight forward approach is to list with a local realtor. You may also find yourself with real estate that needs some work and could therefore fetch a greater price after some repairs. If you do not have the cash for the repairs, but ample time on your hands, there are people I can refer you to that will gladly partner with you on the repairs. Finally, if you are in a rush, don’t have cash to fix up the real estate and just want to get done with it; an investor will pay cash for it. Knowing your options gives you flexibility which gives you power in your decision.
Marketing Real Estate Too Late
Do not make the mistake of waiting too long to market any real estate, if you’d like to settle the estate as quickly as possible. Once you have been approved as administrator or executor of the estate, you can begin soliciting offers on the real estate. In other words, parallel to handling everything else, you can list with a realtor, get advice, solicit offers and even go into escrow. Escrow will not close until you have acquired letters testamentary/letters of administration. As long as your buyers are aware of this, you will do fine. Be sure to use a realtor that understands probate.
Choosing Friends Over the Right Professionals to Do a Particular Job
Now that you might need an attorney, realtor, tax advisors, financial planning and estate planning, you can find yourself surrounded by well meaning friends that want to help. E.g. you might have an attorney friend that practices business litigation that will help you with probate. This is where you must be cautious and make sure you pick your team of professional experts that will get the job done because this is all they do. Similarly, you might have a realtor friend that specializes in a certain area of town or other type of real estate that wants to list the real estate for you. Again, having a realtor with probate experience that specializes in the area of your real estate location will benefit you and ensure you get the most out of it.
Not Keeping Accurate Accounting Records
When preparing accounts, failing to use proper schedules; failing to place entries on proper schedules; failing to adequately describe receipts and disbursements; lumping entries instead of itemizing them; and failing to correctly show carrying and market values, gains, losses, dividends, and interest payment for investments. If you are not comfortable with or not used to accounting and balance sheets, it makes sense to enroll a professional such as a bookkeeper or CPA to help you. At the time of settling the estate all numbers must align and make sense. If not, you might get objections from the heirs or maybe even a judge. In many cases where records were not properly kept, the probate process lasted up to 24 months when it should have taken half that time or less.
Not Picking Up Mail From Decedent’s Property
This is a simple one. As soon as you can, ask that the post office forwards all mail to an address or PO Box that you have access to. The reason being, that you may miss out on important notices and claims from creditors and/or lenders. Another good reason is that you do not want the property to be too inviting for burglars or vandalism. When mail piles up, it is a sure sign that the property is vacant.
Not Keeping Open Communication With Heirs
This goes back to the initial mistake “No outcome in mind” when you begin the process. At the outset of probate it is crucial that all heirs are on the same page and agree that you handle the estate. Along the way you may have smaller setbacks and it will not go as planned. Make sure you communicate every setback and progress. If an heir counts on his/her inheritance by a certain date based on the agreed upon goal you all set, then any delays will greatly impact the heir’s life.
Completing the Estate Process Properly
When the process of managing an estate nears its end, many executors may just distribute the assets without formally closing the estate. To ensure proper closure and avoid any potential liability, it’s crucial to either receive approval from a judge or to create a family settlement agreement. The latter option, which is only possible if all parties are in agreement, provides a clear record of the estate administration, including the distribution of assets and expenses incurred. By documenting everything, the executor can protect themselves from any future debts and the family members have a clear understanding of the process. It’s important to have an attorney prepare this agreement as it offers powerful protection for the executor’s liability.
