What Really Happens in Probate? Part Two
Written by Jim Worthington on September 16, 2018
Last week’s article covered admitting a will to probate and getting appointed by the court. Once the personal representative is appointed, what does he or she do?
The first step is to go online (during the week as the website shuts down for the weekend) and obtain a Taxpayer Identification Number (“TIN”) from the IRS, which the IRS calls an EIN, meaning Employer Identification Number. (Hardly any estates have employees but the IRS still calls it an EIN.) Getting the TIN requires having the social security numbers of the decedent and of the personal representative. It also involves deciding about the estate’s taxable year, and most persons will need the assistance of an experienced attorney to do that. A further word of caution is in order here for those who try this on their own. The IRS website for EINs is free so there is no reason to use the various services that charge in the hundreds of dollars to provide an online portal.
Once the personal representative has a TIN, he or she can set up a bank or brokerage account for the estate. The personal representative should generally consolidate all of the accounts into one for convenient record-keeping and ultimately for distribution to the beneficiaries. If the decedent had a bank account or brokerage account, it may be easier to open the estate account at that institution. Many estates don’t require a large number of checks and can rely on the starter set banks offer.
The next step is to decide what to do with any stocks, bonds, or other investments the decedent owned. That decision is beyond the scope of this article and requires a professional investment adviser’s input.
Two months after appointment, the personal representative files an inventory of all of the assets that have come into his or her hands or of which he or she is aware.
While this is all happening, the Clerk of Court will publish a notice in the local newspaper to let creditors know that the decedent has passed away and that the time to make claims is running.
Kentucky law gives creditors six months from the date the personal representative is appointed to make claims against the estate. Personal representatives must evaluate those claims and make any denials within two months of the end of the six-month period. The notice of denial must warn the creditor that it has sixty days in which to file a lawsuit contesting the denial.
There is an order of preference among creditors:
- After paying secured creditors to the extent of their collateral, the personal representative pays his or her own fee and other costs of administration, such as professional fees.
- The personal representative then pays burial expenses.
- Next, he or she pays preferred claims, such as for taxes.
- He or she finally pays the unsecured creditors, including the secured creditors to the extent their claims exceed the value of the collateral.
After the personal representative pays the creditors, it is time to distribute the estate. Next week, we’ll cover distributing and closing the estate.