The Pitfalls of Qualification
When a loved one dies, there are many practical things that need to get done. Many people think that their first step should be to qualify as the executor or administrator (also known as “the fiduciary”) of their loved one’s estate; however, qualifying as a fiduciary is not a decision to be made lightly and there are many reasons not to probate an estate. This post addresses some of the pitfalls of qualification.
Is a fiduciary personally liable for the administration of the estate? If a fiduciary acts incorrectly, such as consistently missing filing deadlines, investing estate assets improperly, distributing money to the wrong people, or failing to marshal the assets of the estate, they can be personally liable! This means beneficiaries (or even creditors of the estate) could sue them personally for their mistake.
Will administration of an estate cost the fiduciary money? Many fiduciaries are surprised by how much it costs them to administer an estate. In the beginning, the fiduciary usually uses his or her own money to pay the filing fees associated with qualification. As the administration of the estate continues, the fiduciary will continue to pay filing fees out-of-pocket if there are no liquid estate funds available. Additionally, if the fiduciary hires a law firm to help them administer the estate, they should pay the attorney with their own funds. The good news is that the fiduciary can usually get reimbursed for these out-of-pocket expenses and the fiduciary will probably receive a fee from the estate for all their hard work which will cover their attorney’s fees; however, it could take time for this reimbursement and fee payment to occur.
What are the other options besides qualification? If there are only a few assets in the estate, the family can likely administer the estate via Small Asset Affidavit. Estates under $50,000 can be administered with a Small Asset Affidavit. A small asset under $25,000 can be dealt with without qualification and without an Affidavit. Additionally, real property “drops like a rock”, meaning legal ownership passes immediately to the heirs or beneficiaries of an estate upon the decedent’s passing, so typically nothing formal needs to be done to transfer ownership. If you want to clean up the property record, you can record a Real Estate Affidavit or just simply file the will in the local circuit court. Finally, assets that are “non probate” pass by operation of law and do not need to be dealt with in an estate administration. This could include property with survivorship provisions, beneficiary designations, or Transfer of Death designations.
When should I think twice about qualifying? If you think the estate might be insolvent, avoiding qualification may be a good idea. You can avoid the personal liability associated with handling the estate incorrectly and you won’t be out of pocket on expenses that you may not get back. Additionally, small estates or estates that are nonprobate in nature do not need anyone to qualify.
The author and the entire team at Logan & Logan, PLC are available to assist you assessing whether qualification is necessary in your loved one’s estate.
This blog post is presented with the understanding that the publisher and the author do not render any legal, accounting or other professional opinion about your particular circumstances and this post does not create an attorney/client relationship. Because of the rapidly changing nature of the law, information can change and this publication may become outdated.