Probate, the legal process overseeing the administration of your estate after your passing, plays a crucial role in ensuring your assets are handled according to your wishes. While having a comprehensive estate plan is crucial for ensuring that assets are distributed according to your wishes, unforeseen circumstances during probate may necessitate the sale of certain assets despite having an estate plan in place and even if your intent was to pass them on to loved ones. To shed light on this, the Los Angeles attorneys at Schomer Estate & Wealth Advisors provide insight into the reasons an Executor might have to sell estate assets during probate.
Probate Basics
At the time of your death, your estate will be comprised of various assets such as cash, financial accounts, real property, securities, investments, and personal belongings. Probate is a legal process, mandated by law, to accurately account for, value, and eventually distribute these assets in accordance with your Last Will and Testament or state intestate succession laws if you pass away without a Will. Probate also involves authenticating or challenging your Will and allows creditors to file claims against the estate, precisely what can lead to the sale of estate assets.
Creditor Claims and Estate Liquidity
Upon initiating probate, your Executor must notify creditors, both personally and through publishing a notice in a local newspaper publication. Creditors then have a specified timeframe to file claims against the estate. Your Executor reviews and approves or denies these claims, and approved claims must be settled using estate assets. If the estate lacks sufficient liquid assets to cover all approved claims, the Executor may be compelled to sell assets to generate the necessary funds. Approved claims are paid in an order of priority established by state law with claims for things such as taxes, probate administration expenses, and professionals’ fees (Executor, lawyer, appraisers) being paid before bequests contained in a Will can be satisfied.
Why Your Executor Might Sell Assets during Probate
Legal obligations mandate your Executor to settle all approved claims and expenses following the priority order outlined by California law before distributing assets to beneficiaries. When liquid assets are insufficient, your Executor may be legally obligated to sell some estate assets. For instance, if your $2 million estate has $1.5 million in approved claims and expenses, and $1.3 million is tied up in your home, there’s only $700,000 available to cover debts. In such a scenario, selling the home becomes a necessity to generate the necessary $1.2 million for settling claims and expenses. The terms of your Will may indicate that you want your home to be passed down to your children; however, unless there is a way to satisfy all creditor claims without selling the home, your Executor will have no choice but to do so.
While the sale of estate assets may not always be a concern, if there are specific assets you wish to protect from liquidation, it’s crucial to ensure your estate plan includes ample liquid assets to address expenses and debts. Collaborating with an experienced estate planning attorney during the creation or updating of your estate plan is the most effective way to achieve this goal.
Are You Concerned that Your Executor Will Need to Sell Estate Assets?
For more information, please join us for an upcoming FREE seminar. If you have questions about the need to sell estate assets after you pass away, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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