Small Estates Can Have Big Problems
When a relative or friend accepts the position of Executrix, she may not recognize at first the responsibilities involved. Especially when the estate is small, she may convince herself that it can be resolved quickly. Just because the estate is small does not mean that it can be easily resolved. In fact, sometimes, because there is not enough money to go around, it can be more difficult than a larger one.
Consider this common situation. Uncle Jim lived alone and died at the age of 82, having lived in the same house since he married at age 30. Aunt Francine predeceased him by a few years. In the years before his death, Uncle Jim was in and out of nursing homes, sometimes for several months at a time. The house remained vacant. His nephews and nieces visited their uncle and resolved the most obvious problems, paying the health insurance bills and property taxes and checking in on the residence occasionally. Tom, his nephew served as Power of Attorney and was named in Uncle Jim’s Will as his Executor on death.
When Tom took his Uncle’s Will to the Courthouse and probated it, everyone in the family was confident that the estate would be concluded promptly especially since the estate is small and Pennsylvania is one of the least complicated states for probate. This may or may not happen and here are some reasons.
Real Estate Can Complicate Settling an Estate Especially When It Is In Poor Condition. Selling a house from an estate can result in unexpected delays. For many Executors, the common choice is to work through a Realtor. This is probably a smart idea since the average person often does not have the time or contacts to market effectively and may not know what steps to take next.
The contents of the house will need to be sorted and, if there are bequests of specific items, these need to be provided to the beneficiaries. There are businesses that can help in this process and that can separate valuable items and antiques, for instance, from items to be discarded and then arrange for sale of the more valuable property. Note that removal of household clutter can consume more time than anyone reasonably believes but, so far, the process is on track.
Contingencies that could cause delay include:
- The house could fail inspection. Septic, in particular, could require upgrading. Well water, electrical systems, plumbing, all can cause problems requiring correction. While, the property might be sold “as is,” this may result in deep discounts. Also, due to local Codes, certain repairs and upgrades may be necessary regardless.
- With some defects and in some locations, the house might not sell in a reasonable time even at a reduced price.
- The government may have a claim against the proceeds of the sale of the house. While, strictly speaking, a claim by the Department of Public Welfare does not delay the sale of real estate, the Executor must realize that, if Medicaid paid some or all of Uncle Jim’s nursing home bills during the 5 years preceding his death and if the house is part of his estate, then the estate must request a Statement of Claim from Division of Third Party Liability, Department of Public Welfare, Estate Recovery Program, P.O. Box 8486, Harrisburg, PA 17105-8486. The Department will then send a detailed statement of its bill. Resolving an estate recovery claim can take additional time.
An Insolvent Estate Requires Additional Attention. A small estate may be insufficient to pay everyone. Where the assets of the estate are not adequate, Pennsylvania law states who is to be paid and in what order. An Executor could be financially responsible if he makes a mistake and resolving this could take some time. Here is the order in which bills are to be paid by the Executor for an insolvent estate:
- Costs of administration including filing fees, attorney fees, accounting fees and the executor’s compensation.
- Family exemption to certain members of the decedent’s household.
- Cost of funeral and burial and for medicines and medical, nursing, and hospital services provided within six months of death, including reimbursement to Pennsylvania Department of Public Welfare for their payments for these services covering the six months prior to death.
- The cost of a gravemarker.
- Rents for the decedent’s residence for six month prior to death.
- Claims by the Commonwealth and political subdivisions including claims by DPW for services prior to the six month period prior to death.
- All other claims.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.