How do estate settlement expenses get paid?
I am getting conflicting information, my lawyer says the house proceeds cannot be used to pay expenses of administrative needs of the estate, but the Will says that expenses of administrative are to be paid out of the estate (along with expenses of last illness, taxes, and some other things).
Nobody else I've talked with has heard that house proceeds cannot be used to pay estate expenses.
I always thought once the house is sold, the check gets put into the estate bank account, and from there I pay bills (including the lawyer bills which are considerable).
The lawyer says only MERP gets any house proceeds. I think that is contradicting what the Will says, and what my parents intended.
What have other people done, I am thinking I need to find a different lawyer at this point.
How else would expenses of estate administration get paid, if not from proceeds of house sale? Everything else had beneficiaries designated. And the real estate agent gets paid from the house proceeds so why not the lawyer and a few other bills.
My mom's state (TX) is a Level of Claim probate state and paid in order of level. Her estate has class 1, 2, 3 & 7 claims. Class 7 btw is the class for MERP. For her state, my understanding & experience is that Judges determine what is a reasonable compromise if that is needed to settle the estate within the time period allowed (4 years) for probate to be open once Letters Testamentary issued. What I (& others) have been advised to do is to provide documentation in detail for all costs that could be reasonably be included a Class. In addition, within TX Admininstrative Code all reasonable costs documented & associated with the property are deductible from any MERP claim. At some point, probate becomes a negotiation if the assets of the estate will not cover all claims. The house is considered an asset of the estate as it was entered as such within the initial inventory. For a low value or modest house, amount could be very small from which to settle all claims. Probate can be a waiting situation with which eventually someone blinks.
Mallory - I'd suggest you ask your atty if you can enter a claim for all your costs to deal with the house & any funeral costs since mom died. Also ask that IF you do not pay your atty's bill from this point on, does he file a claim against the estate?
Also Isn't there a mortgage on the house? or am I getting your situation mixed up with another? If so, How is the mortgage being paid or has it been paid off via a insurance policy set up to do that?
The only way around this as I see it, is at the closing, where the real estate agent gets paid their 7 percent fee, and there are oodles of other things that get paid....but all these things are "house-related" (mechanic's liens for example, would get attached to the title and be satisfied before the house can close, I assume AT the closing a check would be cut to them in the same way the real estate agent gets a check?).
The priority of claims in MN has #1 "class" being expenses of estate administration, which is lawyers as well as executors fee.
It may be that the only way to interrupt this crazy scheme is to send the whole estate to Probate court, and have a judge rule that the Will supercedes state law....but I doubt they would do that (?).
But this situation I find myself in, should lead EVERYONE to read up on their state's laws regarding "Descent of Homestead.". Because, unless there is a little account set up somewhere, in cash (perhaps some type of special Trust account?), which is solely designated to be used by the executor to use for the estate administration expenses, bills of last illness, etc, there is not going to be any way to "administer" the estate.
I'm just wondering if the will was drafted before that statutory provision went into effect, but that doesn't make sense either. All the Wills I've seen have the provision that last expenses, which are expenses of the estate as I interpret it, are to be paid first before any distribution to heirs. The question would be whether the challenges of your siblings are legally considered last expenses of the estate.
I've just spent some time trying to find something addressing priority of claims and can't find anything on point, not to say that it's not there, I just can't find it.
"If the homestead passes to a person other than a spouse or decedent's descendants or to a trustee of a trust of which the spouse OR THE DECEDEN'TS DESCENDANTS ARE THE SOLE CURRENT BENEFICIARIES, it is subject to the payment of expenses of administration, funeral expenses, expenses of last illness, taxes, and debts. "
I noticed this provision doesn't address payment to lawyers of challenges by siblings. Hmmmmm....
So in this attorneys interpretation, he gets paid, but the expenses of the last illness don't? I hate to say it but this sounds very self-interested and deliberately misinterpretive of the statute.
I'm going to re read it later to see if I missed anything, but my gut reaction is that this attorney is wrong.
Am I correct in assuming, however, that this attorney is the one who's reviewing all the requests from your siblings, for your action, and is getting paid from estate proceeds?
According to the lawyer, the house (which is stated in the Will to be given to the children in equal shares) can only be sold and then 100 percent of the proceeds--without one cent of deduction for estate administration expenses-- has to be split 20 percent for each child. So essentially, even though the real estate agent will get 7 percent, and any mechanics liens, or back taxes, get paid out of the house proceeds, I cannot attach any bills for lawyer's bills, or other estate administration expenses.
But this seems REALLY strange to me. I was operating under the assumption that the WHOLE estate, whatever that consisted of, would get dumped into the estate bank account, THEN expenses paid, and divided 20 percent.
So all that is left is the house, and the lawyer did NOT tell me from the outset that the house proceeds cannot be used to pay any bills!! OMG!!
The kind of lawyer you need to talk to about this is one certified in Elder Law. He or she should not only be very knowledgeable about this kind of situation but also be used to explaining it to clients.
If your parents were on Medicaid, I am surprised there is much to leave to beneficiaries besides the house. And if they weren't on Medicaid, MERP is not involved.