The probate process, particularly formal probate administration, in Florida may be more costly than many people realize. We have previously detailed typical costs for both formal and summary probate administration here. However, this post will specifically focus on two areas of financial uncertainty that frequently come up in probate matters: administrative expenses and creditor’s claims.
Creditor’s Claims
When a decedent dies in Florida, outstanding debts of the decedent may be collected by their creditors. These debts were incurred by the decedent during his lifetime. For example, when formal probate is opened, the personal representative must file a notice to creditors and specifically contact known creditors that the time for filing any claims is now open. Under Florida law, the creditors have a limited period of time to file these claims or risk their claim being forever barred. Creditors can then attempt to collect on the decedent’s debts from their estate by filing a statement of claim. It is important to note that a family member will never be responsible for these debts, the estate alone is responsible.
Expenses of Administration
However, sometimes the process of probate can take some time and the personal representative may need to cover some expenses of administration in order to move along the probate process. This means that the personal representative, or sometimes another individual, may contribute their personal funds to facilitate the probate process. Many personal representatives do not realize that may need to expend some of their own money to facilitate probate. For example, the decedent may have property that the estate will sell so that the proceeds from the sale can be distributed to multiple beneficiaries. The decedent may have also held minimal liquid assets at the time of his death. In order to maintain the property, the personal representative may use their own funds to pay costs associated with maintenance of the property, such as utility bills, until the property is sold and distributed to the beneficiaries. The personal representative can then request reimbursement from the estate as an expense of administration and can recuperate these costs without a court order. Therefore, an individual who contributes their own money to the expenses of administration does not need to file a statement of claim as statements of claim are limited to debts incurred by the decedent during his lifetime.
Who gets paid first?
Section 733.707, Florida State Statutes provides a hierarchy guiding how an estate must pay off its expenses and obligations. Expenses of administration, along with compensation to the personal representative and their attorneys, are classified as Class One, this means they take precedence over creditor’s claim and all expenses of administration will be paid before any creditor’s claims. It is important to note that there are often funeral expenses that must be paid. Funeral expenses are classified as Class Two, making them distinct from other expenses of administration. Based on the statute, these expenses are paid after other expenses of administration but before creditor’s claims. Therefore, if you personally paid $5,000 for your father’s funeral expenses and $1,500 for his headstone, you can be reimbursed up to $6,000, which will be paid before any creditor’s claims. Claims by the federal government, such as for Medicaid, as well as claims by hospitals for treatment in the sixty days before the decedent’s death, are also given preference over the claims of other creditors.
Exempt Homestead
It is important to note that exempt homestead property has its own considerations. Exempt homestead cannot be attached by the claims of creditors. However, Florida law does provide that if a personal representative maintains exempt homestead property that is not occupied by a person with interest in the property (for example the surviving spouse) and the personal representative expends their own personal funds “to preserve, maintain, insure, or protect the property…the personal representative shall be entitled to a lien on that property and its revenues to secure repayment of those expenditures and obligations incurred.” Therefore, in these circumstances and if the personal representative strictly adheres to the procedure provided by statute, exempt homestead is not completely protected from the costs of administration, only from the claims of creditors.
Closing an Estate
It is important to note that some expenses of administration may not come until most of the estate assets have been distributed and the personal representative is closing the estate. The prudent personal representative will make sure that there are adequate estate assets to ensure that their attorney will be paid and other expenses of administration will be covered.
Contact us today to schedule a free consultation.
If you are a beneficiary or have been named personal representative in a decedent’s will, contact us today to schedule a free consultation. During the consultation, one of our attorneys will review the facts of your case with you, discuss your position in the estate, and answer any questions you may have about the probate process.