The Surprising Challenges People Encounter in Probate
dan • July 9, 2022
When we help people with estate planning, a lot of our clients assure us that their estates are “simple.” Yet a lot of people who have been through an estate administration process tell us that it was harder than they anticipated. Why the disconnect?
My theory is that it is because a lot of people underestimate the complexity and stressfulness of the tasks required in an average probate. Many of these tasks are common. That does not, however, mean they are easy. Selling a house, for example, is a multi-step project with an enormous amount of money on the line. Filing even a basic tax return is a notoriously difficult task. Keeping track of bills and staying on top of finances is a challenge for most people.
Now imagine doing that not with your own assets and finances, but with someone else’s. And imagine that if you a make a mistake, it doesn’t just cost you money, but other people too. And imagine that you didn’t get to choose those other people. You got thrown in with them by fate. Sure, those people are likely family members, but that certainly doesn't mean you get along with them or see eye-to-eye.
With all that in mind, it can become hard to believe it ever goes well. It usually does, but people can be surprised what can cause the process to become complicated, messy, or contested. Many people assume that if the estate is relatively modest and is just going to be equally divided between siblings, then there isn't much possibility for difficulty. Oh, if only that were true!
My theory is that it is because a lot of people underestimate the complexity and stressfulness of the tasks required in an average probate. Many of these tasks are common. That does not, however, mean they are easy. Selling a house, for example, is a multi-step project with an enormous amount of money on the line. Filing even a basic tax return is a notoriously difficult task. Keeping track of bills and staying on top of finances is a challenge for most people.
Now imagine doing that not with your own assets and finances, but with someone else’s. And imagine that if you a make a mistake, it doesn’t just cost you money, but other people too. And imagine that you didn’t get to choose those other people. You got thrown in with them by fate. Sure, those people are likely family members, but that certainly doesn't mean you get along with them or see eye-to-eye.
With all that in mind, it can become hard to believe it ever goes well. It usually does, but people can be surprised what can cause the process to become complicated, messy, or contested. Many people assume that if the estate is relatively modest and is just going to be equally divided between siblings, then there isn't much possibility for difficulty. Oh, if only that were true!
real estate
Most people own real estate at some point in their lives. While real estate transactions can be complicated, regular people with no special training engage in them every day. So why would real estate present any special challenge in an estate administration?
First off, most real estate that ends up in an estate administration process is nowhere near ready to sell. Even well-maintained houses usually require at least a little bit of preparation work — a touch up in paint, replacement of broken hardware, cleaning up landscaping, etc.
A very large portion of houses going through estate administrations, however, are not well maintained. If the owner was elderly, it may have been decades since the house was updated in any significant way. We regularly encounter situations where the house needs substantial work or may be so far out of code, it literally can’t be sold to anyone other than a fix-and-flip investor. Another situation we see more often than you would expect is hoarding, a house full of stuff, most of which is garbage, but some of which may be valuable or contain critical information. Finding those valuable items can be like searching for a needle in a haystack.
Another problem with real estate is that all real estate is unique. The estate’s beneficiaries are not emotionally attached to any particular dollar in a bank account, or any particular share of stock in an investment account. They may, however, have lots of emotional attachment to the real estate.
While it’s not a huge sample size, I can report that, as of this writing, real estate is at the center of the problem in every difficult or contested probate administration in which we are involved.
First off, most real estate that ends up in an estate administration process is nowhere near ready to sell. Even well-maintained houses usually require at least a little bit of preparation work — a touch up in paint, replacement of broken hardware, cleaning up landscaping, etc.
A very large portion of houses going through estate administrations, however, are not well maintained. If the owner was elderly, it may have been decades since the house was updated in any significant way. We regularly encounter situations where the house needs substantial work or may be so far out of code, it literally can’t be sold to anyone other than a fix-and-flip investor. Another situation we see more often than you would expect is hoarding, a house full of stuff, most of which is garbage, but some of which may be valuable or contain critical information. Finding those valuable items can be like searching for a needle in a haystack.
Another problem with real estate is that all real estate is unique. The estate’s beneficiaries are not emotionally attached to any particular dollar in a bank account, or any particular share of stock in an investment account. They may, however, have lots of emotional attachment to the real estate.
While it’s not a huge sample size, I can report that, as of this writing, real estate is at the center of the problem in every difficult or contested probate administration in which we are involved.
People in Possession of Property That Isn’t Theirs
One of the first things the executor of an estate should do is find and secure the Decedent's property. This can be difficult when the property is in the possession of someone else. The most common situation that we see this arise is where someone is living in a house that isn’t theirs. Perhaps a child who never left home or one that moved back in with parents to help them in their elder years. It can also happen with cars and personal property.
The problem in all these scenarios is that the person in possession of the property and the people entitled to receive that property usually are not the same people. And depending on the circumstances that led to this situation, the person in possession of the property may think of it as theirs.
Sorting this situation out can require some awkward conversations and hurt feelings, if not litigation. It is not unheard of, for example, to have to evict siblings, or send the police to repossess personal items.
The problem in all these scenarios is that the person in possession of the property and the people entitled to receive that property usually are not the same people. And depending on the circumstances that led to this situation, the person in possession of the property may think of it as theirs.
Sorting this situation out can require some awkward conversations and hurt feelings, if not litigation. It is not unheard of, for example, to have to evict siblings, or send the police to repossess personal items.
Property That Is Difficult to Value
Fairly and a
ccurately distributing an estate of course requires completely and accurately identifying and valuing the estate’s assets. Bank accounts, publicly traded investments, and residential real estate is typically easy to find and value.
But every estate has tangible personal property ( i.e. , furnishings, jewelry, artwork, clothing, collectibles, etc. inside the house). Most of the time, the hardest problem created by tangible personal property is figuring out how to get rid of it. Sometimes, however, there are unique items with sentimental or market value. These situations can be very difficult. The underlying problem in these situations is that personal property is usually not easy to divide. And unlike a bank account, that is worth exactly the same amount to everyone, different people value different personal property differently.
Other assets that can be difficult to value and divide are closely held businesses and non-residential real estate.
But every estate has tangible personal property ( i.e. , furnishings, jewelry, artwork, clothing, collectibles, etc. inside the house). Most of the time, the hardest problem created by tangible personal property is figuring out how to get rid of it. Sometimes, however, there are unique items with sentimental or market value. These situations can be very difficult. The underlying problem in these situations is that personal property is usually not easy to divide. And unlike a bank account, that is worth exactly the same amount to everyone, different people value different personal property differently.
Other assets that can be difficult to value and divide are closely held businesses and non-residential real estate.
Difficult Creditor Issues
Most people go into estate administrations focused on the beneficiaries — the people who are going to be receiving assets from the estate. Creditors, however, are just as much a part of the process. The Personal Representative or Trustee has fiduciary duties to the estate’s creditors too, meaning that they are expected to deal with those creditors openly and fairly, and get the best outcome possible for them. They can't hide from those creditors, or mislead them about the estate's financial wherewithal to pay its debts.
In most probate cases, the creditor claims are manageable and unsurprising. Sometimes, however, neither turns out to be true. It’s not unusual, for example, for there to be substantial medical bills from the Decedent's end-of-life care. In rare cases, the estate can become involved in litigation (or can already be in litigation from something that happened during the Decedent’s lifetime). These situations can lead to long delays and complicated court processes.
In most probate cases, the creditor claims are manageable and unsurprising. Sometimes, however, neither turns out to be true. It’s not unusual, for example, for there to be substantial medical bills from the Decedent's end-of-life care. In rare cases, the estate can become involved in litigation (or can already be in litigation from something that happened during the Decedent’s lifetime). These situations can lead to long delays and complicated court processes.
Heirs With Expectations out of sync with Reality
People creating an estate plan sometimes agonize over whether to share the details of that plan with the estate's beneficiaries. On one hand, telling people what the plan says can make it difficult to change the plan later on. On the other hand, if the plan differs from what the beneficiaries expect, perhaps it is better to find out about that while the person who has the power to change it is still around to do so.
Like a lot of things in life, it’s not necessarily the result that’s the problem. It’s how that result compares to expectations. A person who would have been perfectly happy to receive $50,000 finds that amount to be intolerable disappointing if he was expecting it to be $100,000. That disappointment is exacerbated tenfold if that $100,000 goes to a sibling instead.
It can be very difficult to predict at the beginning of an estate administration process whether it is going to be easy or hard. The problems listed above don’t necessarily crop up immediately. But if you see the potential for these issues to arise in an estate in which you have ask interest, either as an executor or a beneficiary, being alert to the possibilities can help head them off.
Like a lot of things in life, it’s not necessarily the result that’s the problem. It’s how that result compares to expectations. A person who would have been perfectly happy to receive $50,000 finds that amount to be intolerable disappointing if he was expecting it to be $100,000. That disappointment is exacerbated tenfold if that $100,000 goes to a sibling instead.
It can be very difficult to predict at the beginning of an estate administration process whether it is going to be easy or hard. The problems listed above don’t necessarily crop up immediately. But if you see the potential for these issues to arise in an estate in which you have ask interest, either as an executor or a beneficiary, being alert to the possibilities can help head them off.
What Next?
If you are involved in an estate administration process, either as the executor or as a beneficiary and might benefit from legal advice, you can:
- Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
- Visit our estate administration to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Learn more by reading our blog or watching our videos .
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