Probate Administration 101: What Is It? And What To Do?
When a person dies, the distribution of assets happens according to their will or estate plan. Sometimes this distribution runs into conflicts and disagreements amongst family members and creditors.
When disagreements occur, a case is filed with a local court system to review the conflicts. At the start of 2021, the South Carolina State Court Administration office reported that there were over 50,000 probate cases in the statewide court system.
Probate administration means distributing these possessions consistent with an existing will. If you were recently appointed as a will’s executor, read more here on the process.
Probate Administration Defined
Probate administration means managing someone’s personal property after they die. When someone creates their will, the legal process will validate their last wishes after their death. This process also helps execute their instructions and distribute their assets.
When someone dies without a will in place, the local probate court decides on how to allocate the remaining property.
What Happens After a Letter of Administration in South Carolina?
Receiving a Letter of Administration in South Carolina marks a significant step in the probate process when someone passes away without a valid will. This document officially appoints an individual, known as the Administrator, to manage and settle the deceased person’s estate. While obtaining the letter is a crucial milestone, it is merely the beginning of a complex series of responsibilities. The Administrator is now tasked with a fiduciary duty to act in the best interests of the estate and its beneficiaries, ensuring all legal requirements are met before the estate can be formally closed.
Understanding the Letter of Administration
A Letter of Administration is a legal document issued by the South Carolina Probate Court. It grants the appointed Administrator the authority to act on behalf of the deceased individual’s estate. This is necessary when a person dies “intestate,” meaning without a will, or if a will exists but doesn’t name an executor, or the named executor is unable or unwilling to serve.
The letter serves as official proof of the Administrator’s power to access bank accounts, sell property, pay debts, and distribute assets according to South Carolina’s laws of intestate succession. Without this formal appointment, financial institutions and other entities will not recognize an individual’s right to manage the deceased’s affairs.
Initial Steps After the Appointment
Once the Letter of Administration is issued, the Administrator must take several immediate actions. The first crucial step is to obtain an Estate Identification Number (EIN) from the Internal Revenue Service (IRS). This is like a Social Security number for the estate and is required for opening an estate bank account and filing tax returns.
Next, the Administrator should open a separate bank account in the name of the estate. All funds belonging to the deceased should be deposited into this account, and all estate-related expenses should be paid from it. This separation of funds is vital for maintaining clear financial records and avoiding commingling of assets, which can lead to legal issues.
Gathering and Valuing Assets
A primary responsibility of the Administrator is to identify, locate, and take control of all assets belonging to the deceased. This includes real estate, bank accounts, investment portfolios, vehicles, personal belongings, and any other valuables. Once identified, these assets must be properly valued.
Real estate may require a professional appraisal, while personal property might be valued through a combination of appraisals, online research, or estimates.
It’s important to differentiate between probate assets (those that pass through the estate) and non-probate assets (such as life insurance policies with named beneficiaries or jointly owned property with rights of survivorship), as non-probate assets do not fall under the Administrator’s direct control for distribution. An inventory of all assets and their values must be filed with the Probate Court within a specified timeframe, usually 90 days from the appointment date.
Notifying Creditors and Paying Debts
South Carolina law requires the Administrator to notify potential creditors of the deceased’s passing. This is typically done by publishing a notice in a local newspaper, informing creditors that they have a specific period (usually eight months from the first publication date) to file claims against the estate.
The Administrator must also send direct notice to any known creditors. All valid claims must be paid from the estate’s assets before any distributions can be made to heirs. If the estate’s assets are insufficient to cover all debts, South Carolina law provides a specific order of priority for paying creditors. The Administrator must carefully review all claims and challenge any that appear invalid or excessive.
Managing Estate Finances
Throughout the probate process, the Administrator is responsible for the prudent management of the estate’s finances. This includes paying ongoing expenses such as utility bills for real estate, mortgage payments, insurance premiums, and property taxes.
The Administrator must also handle any income generated by the estate, such as rental income or dividends from investments. Accurate and meticulous record-keeping is paramount. Every transaction, including receipts and disbursements, must be documented. The Administrator is also responsible for filing the deceased’s final individual income tax return and any necessary estate income tax returns (Form 1041) with the IRS and the South Carolina Department of Revenue.
Distributing Assets to Heirs
Once all debts, taxes, and administrative expenses have been paid, the Administrator can proceed with distributing the remaining assets to the legal heirs. In South Carolina, if there is no will, the law of intestate succession dictates who inherits the property.
Generally, this means assets are distributed to the surviving spouse, children, parents, or other close relatives in a specific order. The Administrator must ensure that distributions are made correctly according to these laws. Before making final distributions, it’s often advisable to obtain a release from the heirs, acknowledging receipt of their share and releasing the Administrator from further liability.
Filing the Final Accounting
Before the estate can be officially closed, the Administrator must prepare and file a detailed Final Accounting with the South Carolina Probate Court. This document provides a comprehensive summary of all financial activities of the estate from the time of the Administrator’s appointment until the final distributions.
It includes a listing of all assets initially collected, all income received, all expenses paid, and all distributions made to heirs. The Final Accounting demonstrates that the Administrator has fulfilled their fiduciary duties and managed the estate’s assets appropriately. Interested parties, such as heirs or creditors, typically have an opportunity to review and object to the accounting if they find discrepancies.
Closing the Estate
After the Final Accounting has been approved by the Probate Court and all assets have been distributed, the Administrator can petition the court to formally close the estate. This involves filing a Petition for Discharge, requesting that the Administrator be relieved of their duties and liabilities.
Once the court grants the discharge, the estate is legally closed, and the Administrator’s responsibilities are concluded. This final step provides legal closure and protects the Administrator from future claims related to the estate, assuming all duties were performed diligently and lawfully.
Potential Challenges and Considerations
The administration of an estate can present various challenges. Disputes among heirs, unexpected debts, difficulties in valuing or selling assets, and complex tax issues are common. The Administrator may also face personal liability if they fail to properly fulfill their fiduciary duties, such as mismanaging funds or failing to pay legitimate debts.
It is highly recommended that an Administrator seek legal counsel from an experienced South Carolina probate attorney. An attorney can provide guidance on legal requirements, assist with court filings, mediate disputes, and help navigate any complexities that arise, ensuring the process is handled efficiently and in compliance with state law.
Probate Administration Terms
Probate administration involves terminology that can appear overwhelming when you’re already handling a great load of personal grief. Some probate terms you’ll need to learn include:
Decedent
Decedent is a legal term used in estate planning and probate matters. This term refers to the deceased person whose estate is subject to probate proceedings.
Personal Representative or Executor
This is the person responsible for executing the final instructions contained within the will. This role is also called a personal representative.
Letters of Testamentary
These documents come from the local probate court to authorize the executor to begin executing the will.
Notice to Creditors and Notice for Probate
These are written notices sent to any interested party in the estate in question. Executors send these notices to creditors and identified heirs.
Informal Probate Procedures
Those states that adopt a Uniform Probate Code don’t conduct probate court hearings. This code applies whether the estate is small or large.
This system also applies if the deceased left no will. If someone contests a will, they can’t use this informal system.
Steps to Navigating the Probate System
Your case is determined by your own state’s laws. But most probate cases will go through this process.
Probate Opens
Executors will file a petition with the probate court where the deceased lived. Executors must “prove” a will. They can’t distribute any estate assets until they complete this step.
Send Notice
When the probate court approves the will and appoints the administrator, they should notify interested creditors or other parties. “Interested parties” refers to those specified in the will, as well as other relatives. Probate law refers to these people as the “next of kin.”
An administrator can post a notice in their newspaper if an interested party’s address can’t be found. Interested parties can include:
- Relative(s) who might inherit an estate in the absence of a will
- Creditors that the executor learns about after processing the decedent’s financial papers
Itemize Assets/Property
Probate administration also includes calculating the estate’s total value at the time of death. Executors calculate these assets themselves or consult a professional appraiser. Executors might also consult a broker to calculate the value of personal investments (i.e., stocks and bonds) at the time of death as well.
Executors send inventory lists to the estate’s heirs as well as the probate court. An itemized asset list can help demonstrate that the estate was evenly distributed amongst the heirs and creditors.
Distribute Assets
“Asset distribution” doesn’t only apply to making sure beneficiaries receive their inheritance. Distributing assets also include paying out the estate’s outstanding taxes or debts. Asset distribution also includes closing any of the decedent’s existing bank or retirement accounts.
Distributing assets also includes following the laws to leave money designated for minors. A minor can’t legally inherit funds directly. The executor creates a trust to hold the money until the minor is an adult and manages that trust until the minor grows up.
Close the Estate
The last step in probate administration is to close the estate. The executor files a petition to disband the estate and closes the case. This petition is filed once all the assets have been sold, discarded, or distributed and the executor’s and necessary court fees are paid.
What Is Probate Court?
Probate court is the legal forum when conflicts arise with probate administration. Probate judges can review a case if major disagreements come up. Here are some examples of when a probate judge can intervene.
When a will is uncontested that means all involved parties agree that it’s valid. If someone disagrees with a will or that it contains errors, the case is submitted to the court. That’s when a judge will decide if these concerns are accurate
Creditors to an estate must claim outstanding debt within certain deadlines. If an executor denies a creditor’s claim, a judge will rule on the matter
Sometimes executors need to sell estate assets, just to settle outstanding creditor debt claims. If they disagree with those creditor claims, executors can ask a judge to rule on these matters as well
Beneficiaries may disagree with the way the executor is performing their duties. These beneficiaries can bring their concerns to a judge to review
What Is a Probate Lawyer?
One of the main players in probate administration is the probate lawyer. A probate lawyer can file petitions to appoint an executor and report to the court what the executor completed during his/her administration period. Probate attorneys receive creditor’s claims and send notices to heirs and beneficiaries that the case is opened or closed.
They also handle all required procedures in the courts. For example, they may file a will or contest who becomes the executor. They can handle creditors’ claims and gives notice to creditors, and heirs, beneficiaries, and other people who should receive notice of probate.
Next Steps in Probate Administration
If you are an estate’s executor your first step is to file a petition with the probate court where the deceased lived. You can’t distribute the estate’s assets until you finish this step. The local court will then decide if the will is valid.
Prepare your notices to beneficiaries. Review all creditors’ claims filed against the estate. Itemize the value of the estate and then distribute the assets according to your local court laws.
If you encounter problems along the way with probate administration, don’t hesitate to give us a call. The De Bruin Law Firm is ready to help you with your probate responsibilities.