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Waiting to Distribute Assets in Probate

Posted on: May 9th, 2017
timingAsset distribution does not occur in the early stages of estate administration for several reasons. Executors transfer assets to heirs after inventorying the estate and satisfying debts. Likewise, trustees generally wait to distribute trust assets to beneficiaries until they have determined that all expenses payable from the trust have been paid. External factors can delay distribution from both estates and trusts. 

Distribution of estate assets typically is dependent on the requirement of providing notice to creditors, after which creditors have a period of time to submit claims to the estate. Every state has unique time demands for creditor notifications, and varying statutes of limitations for creditor claims. (Our probate attorneys practice in multiple states. Learn about creditor notification requirements for North Carolina executors and the creditor claim period for Florida estates.) 

After the notification period passes, the executor must pay valid creditor claims and estate debts. Appraisals and date-of-death values must be documented. Unique assets may pose valuation complications and delays. During this time, the estate may accrue income. The executor maintains accountings throughout estate administration, and applicable taxes on estate assets and income must be reported and paid prior to distributing the balance of estate assets to beneficiaries. 

If the decedent had one or more trusts in place, the trust document(s) instruct how and when the beneficiaries receive assets. Every trust is unique. The trust may remain active throughout the beneficiaries’ lifetimes and future generations, or it may include incentive provisions that place requisite standards on beneficiaries. As with possible estate income, trust assets may accumulate income. Proper reporting and payments must be managed on a regular basis by the trustee. Factors that could delay transfer of trust assets include administrative errors, trustee negligence, ambiguous terms, and the trust provisions themselves, among other factors.

An executor pressured by surviving family to distribute an estate early might be tempted to comply with these requests with the best of intentions, but the estate may then be deficient in satisfying debts. An executor may be held personally liable if distributions are made prior to satisfying all estate debts; thus, the executor might be required to personally pay estate debts if they distribute assets too soon. The personal risk of early distribution is often too great for an executor to oblige.

Statutory requirements in the estate’s jurisdiction dictate the order in which estate debts are paid; however, the executor ultimately manages when debt payments are issued. Executors typically notify creditors of delayed payments, if a delay is expected. 

Consequences may occur for late payments and are dependent on the creditor. For instance, if an executor pays an insurance bill late, benefits may lapse. If a tax bill is paid late, a lien may be placed. A late credit card payment could result in a penalty and increase in interest. Negligent executors are personally liable for their errors and the damages that result per their action or inaction. It’s in the executor’s, and the estate’s, best interest to prioritize and pay debts before estate distribution.
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