Probate in Washington
Chapter 2: A Probate Estate over $100,000 and Real Estate

Nathan, and his wife, Terri, were in nearly similar positions when they died a few years ago.  Again, Terri died two years earlier, then Nathan died. Everything was jointly owned.  The difference between these two couples was that Nathan and Terri owned real estate, a car, a stock account (not a retirement account so it could not be designated to anyone), and Nathan owned a business selling things on eBay.

For this couple, again, I did little about Terri except to file her Will. For Nathan, the process was more complicated, but still relatively easy. I opened a probate case in the Court.  The Wills named each other as the personal representative and didn’t say what should happen if both of them were gone.  It also said no bond was required for the personal representative they had named.  When there is no Will, or someone who wasn’t identified as the personal representative is serving at that job (i.e., the named person died or declined), then the court has to assume that the deceased person didn’t particularly trust someone else. We have to assume that if the deceased person had trusted someone else, then he would have named that person in the Will. Since the eldest son wasn’t named in the Will as the personal representative, we had to get a bond, similar to an insurance policy, to guarantee that money isn’t misused.  The bond has to cover the entire value of the estate, so it had to be large enough to equal the value of the home, the stock account, etc. The Will also said that the Court should treat this case as “non-intervention”, which means that the Court would allow the personal representative to act without constant supervision as soon as we have proven that we’ve secured an appropriate bond. It’s expensive to get a bond; on the other hand, it’s more expensive to operate without non-intervention powers, because I’d be back in Court asking for permission to do everything.

The personal representative had to set up an estate account, so that any money coming in for Nathan’s estate could be put into its own safe place.  If we think the probate will be relatively short and if the assets are not in mega-dollars, then I usually tell people to get an account that doesn’t pay interest.  That way we can avoid an estate income tax return. When anything is sold, if payments from the eBay sales come in, if he gets a tax return, it all goes into the estate account. (I’m assuming that Nathan was organized and left someone the passwords to his eBay business.)  He’ll need a tax identification number to open the account, which we do with him when he’s in the office.

After opening the case at the Court, we published the Notice to Creditors in the newspaper the next day. Now creditors only had four-months to file the claims. Then we took the list of creditors that we knew about, using the bills that came in the mail, and we sent each of them a Notice to Creditors and a Claim Form, as well. 

This is an important point: a bill is not a claim. Just because a bill arrives by mail doesn’t mean that the personal representative is going to pay it. The creditor has to fill out a claim form and then both file it in the Court AND mail it to the personal representative (or his attorney). If the creditor doesn’t do both of those things within the four-month period, the creditor doesn’t get paid. It doesn’t matter how many bills they send: no claim = no payment.  When people tell me they want to avoid probate, I point out that the creditor claim process oftentimes makes bills go away.  Credit card companies are notoriously bad at following the process. More than once, I’ve been able to send creditors away empty-handed because they didn’t file claims on time. While you may think that this is somewhat unethical, remember our first purpose for probate. We protect the spouse and small children, and we want a reasonably swift settlement of the estate. On two occasions that I can recall, a husband had collected tens of thousands of dollars in credit card bills and the wife knew nothing about them. In each of those cases, the wife had small children, no job and little cash. The only thing she had was the equity in the house. We sent out the creditor notices to the credit card companies, they didn’t file claims and they got nothing. The wife was able to keep the equity in the house.

There are some special notices that we have to send out, even if we know for sure that they are not needed. By law, we must notify the Office of Financial Recovery. If the State helped with medical bills or long-term care services for the deceased person, then the State has to be paid back. They have to be given notice, even if the family believes that there is no possibility that Nathan ever used those services. We also notify the Department of Revenue, because Nathan had a business and he might owe some sales tax. In this case, neither office sent a claim. 

When claims arrive at both the Court and my office, then we ask the personal representative to accept or reject them. They have to be accepted if they are filed on time, and if they are accurate and real. The creditor has to give some proof of the claim. I’ve only seen one false bill in over 20 years of probate work, so rest assured that it’s unlikely you’ll see a fake claim. If the personal representative doesn’t believe that the bills are correct, then he rejects them. Once rejected, the creditor has 30 days to file a lawsuit to collect. If the creditor doesn’t file suit, again, the creditor gets nothing. No lawsuit = no payment.

In the meantime, the house had to be sold. That means the house had to be cleaned out and the items inside either sold, given to the heirs, or given to charity.  This is one of those areas where the case can go sideways.  “Mom promised it to me” is heard often! Fortunately, Nathan and Terri have kids that all get along, won’t fight over the great stuff in the house, and generally cooperate with each other. It doesn’t always happen that way. Since the personal representative had non-intervention rights, he could sell the house without Court permission. 

The house brings up the question of tax for the first time. We have to pay tax on things we own, if we sell them for more than we paid for them. The home is the major exception, because there is no tax due for up to $250,000 of gain on a personal residence for a single person. You’ll have to get an accountant involved, first to calculate the gain, and second, because the “estate” is an artificial person and has to pay income tax.  That benefit only applies to the person owning the house, or to the estate at his death. So if you are considering giving away the personal residence to heirs before death, seek the advice of an attorney before you do it. There could be a huge tax consequence to doing this.

Once we’d wrestled out the bills and four-months had gone by, the house had been sold, and the accountant had figured out how much the taxes will be (if any), then I advised the personal representative to distribute most of the money.  It makes sense to hold back some of it, just in case some odd-ball thing comes out of left field.  Life is strange, and despite all I’ve said, things go wrong. So we wait just a little bit more. Then he gave out the rest of the money a few months later, and we closed the estate. Closing is easy. The family got along, and with non-intervention powers, we only had to give the Court written notice that we were closing the estate. We were not even required to file an Inventory of the assets in the Court, although the personal representative was very careful to share the information with the others in his family. After 30 days, the file was closed and that was the end.