Selling Estate Assets to Pay Claims

IL estate planning attorney, IL probate lawyerMany people die with some debt, whether it is credit card debt or unpaid utility bills. The executor is tasked with paying valid claims that have been submitted in a timely manner. When the estate has cash in it, then it is relatively easy for the executor to pay the claims.

Problems can arise, however, when there is not enough cash in the estate to cover all debts. In this situation, the executor will need to sell estate assets, but these sales can anger beneficiaries who were expecting to inherit the asset that is sold.

If you are serving as an executor and need to sell assets, you should contact an Illinois probate attorney to discuss your case. This is a delicate area of law, and executors can get into trouble if they sell the wrong assets or favor one beneficiary over another.

An Example of the Problem

Imagine that Michael dies owing $3,000 on a credit card and unpaid utility bills totaling $150. Fortunately, he dies with $15,000 in cash. Here, it is easy for the executor to use the cash to pay off the valid claims. True, the person expecting to inherit the cash will receive less, but using the cash is often the sensible option.

Now imagine that Michael has no cash but the same amount of debt. However, he leaves a home worth $150,000 and another piece of real estate worth $100,000. He also has an old car worth $2,000. How does the executor pay the claims? As we can see, selling the car will not be enough to cover the full amount. Should the executor sell one of the pieces of real estate? Which one?

Additional problems arise if different people are slated to receive the assets. For example, Michael’s daughter might be poised to inherit the home, but his son is named as the beneficiary of the other piece of real estate and the car. Is it fair to reduce the value of the son’s inheritance to pay off the creditor claims? Might he object?

Fiduciary Duties

Illinois law imposes certain duties on the executor of an estate. One of the most important is the duty of impartiality. This duty prohibits the executor from favoring one beneficiary over another. The executor should seek consensus, but that is not often possible.

The problem of paying estate claims can make things very “sticky” for an executor when there is insufficient cash and/or very large debts. The executor must sell some assets to pay off claims, which the executor cannot ignore. At the same time, the executor is reducing the gift that at least one beneficiary receives.

Executors also must take reasonable care to preserve the value of the estate. Some executors might think it best to liquidate the entire estate, but that can be expensive and reduce the estate’s value.

Contact an Illinois Probate Attorney for Assistance

Serving as an executor is often not as straightforward as many people expect. Professional legal guidance can help executors fulfill all their duties in an efficient manner. For help, contact a skilled Naperville probate lawyer at The Gierach Law Firm at 630-756-1160.

 

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2104&ChapterID=60&SeqStart=23000000&SeqEnd=24500000