Florida Estate Planning Lawyer Blog
Within one to four months (depending on the particular state) after the executor has been appointed, he is required by law to file a “complete” inventory of the estate’s assets. A Florida Probate Inventory is required to be filed within 120 days. The inventory is submitted to the court and, like all other papers submitted to the court, becomes a matter of “public record” (available to anyone who wants to look at it). Briefly, there are two reasons for the filing of the inventory. First, to indicate to the court the items of property for which the executor will later “account” to the court (tell the court in detail what he did with all these items when the estate is settled), and to let the beneficiaries, creditors, and all other interested parties know just what is included in the deceased’s probate estate. If the executor delays or refuses to file an inventory, any interested party may ask the court to order him to file one, although if there are no disputes or contests, executors often file their inventories late.
The inventory will include any type of property (stock, bonds, real estate, furnishings, jewelry, copyrights, claims against others, etc.) that belonged to the deceased at the time of his death. Normally, this only includes property that stood in the deceased’s name alone, but could very well also list property that was being held by someone else, such as property, for example, that the executor believed should be a part of the deceased’s probate estate. Otherwise, nonprobate property, such as jointly held property, life insurance or retirement plan benefits payable to a named beneficiary, or assets in a living trust, will not be mentioned in the probate inventory.
Payment of Claims
In order to facilitate an orderly settlement of the estate within a “reasonable” period of time, every state provides for certain specified time periods within which claims against the estate must be made; otherwise, they will not be collectible, no matter how valid. The period usually begins at a specified time (say three months) after the executor has been appointed or has given notice to creditors, and ends six to twelve months after that. Unless the court for some reason allows an extension, it is only within this period that a creditor may make a formal claim against the estate, and state courts are fairly strict on this point. The executor, however, has an obligation to notify all known creditors and to make a reasonable effort to identify creditors, so that they will have the opportunity to file a claim within the special period.
Since this period is specified as being “open” to creditors’ claims against the estate, the executor must be careful not to prejudice creditors by distributing all or too much of the estate property to beneficiaries before the end of that period. If that happened, then the executor would be held personally liable for valid creditors’ claims, and for this reason, executors will not, as a rule, distribute estate property before the end of the special claims period. This is not to say that claims may not be paid by the executor before or after this special time period, since the executor can pay valid, undisputed claims almost any time he wants. It is/usually the disputed and particularly the unknown claims that worry the executor and apply to this special period. Once the period expires, the executor need worry only about known claims that he intends to pay, other valid expenses, taxes, and finally, distribution to the beneficiaries.
Payment of Debts, Fees, Expenses, and Taxes
Simultaneous with his assessment of what claims may be made against the estate, the executor will begin to determine the remaining debts, fees, and expenses that he is aware of (such as doctors’ bills, utility bills, outstanding charge account balances, and of course legal fees and executors’ fees), since all of these items will have a bearing upon the estate taxes that may be due in the estate. In fact, part of the executor’s job is to file the estate tax return and see that the taxes are paid when due (taxes are usually due within nine months after the date of death, unless an extension is granted). Claims and expenses for which there is no dispute are usually paid by the executor within this nine-month period.
Putting all this information together, the executor will prepare (or have a professional prepare) the deceased’s estate tax returns showing all the property included in the estate, reduced by allowable claims and deductions, to arrive at the tax due, if any. Filing of the estate tax returns does not mean the estate is settled. In fact, the federal and/or state governments may take several months to a year after filing to “accept” the returns or to respond by asking for more information or, in some cases, in deciding that the estate will be audited. Until the returns are accepted and the final tax liability (if any) is agreed upon and paid, the executor should not distribute all the assets of the estate. If he does and if there is not enough money left in the estate to pay the balance of the tax due, he will be personally liable for payment of the remaining tax on the probate estate.
Note that if the estate is “small” enough in size, it may not be necessary to file a federal estate tax return at all. That is, if the value of all the property
included on the deceased’s federal estate tax return does not exceed the allowable “tax free” amount ($675,000 in the year 2000), then no federal return is due. This does not mean that the state in which the deceased lived or owned property would not require a return, since state laws vary on this. In many states, even though no estate tax may be due, it may be necessary to file a return just to “prove” that no taxes are due so the beneficiaries can inherit the property without fear of a tax springing up later. If estate tax returns are filed and finally accepted, the federal and state governments will normally give the executor a “closing letter” stating that no further taxes are due in the deceased’s estate.