5 Delaware Probate Mistakes to Avoid
by Robert M. Kleiner, Esquire, www.7890Law.com
- Not Filing for Probate
Probate is one of several methods by which the property of a decedent lawfully passes to an heir or other beneficiary. In Delaware, the Register of Wills Office (for each county) oversees Probate, but also oversees an alternative method of distributing assets of a Decedent. This alternate method, Distribution of Property without Letters, is commonly referred to as “Small Estate Distribution.”
Sometimes Small Estate Distribution is mistakenly referred to as “Small Estate Administration” or “Small Estate Probate.“ Small Estate Distribution, however, is NOT Probate. (The confusion may come from the fact that the Register of Wills Office oversees both.)
Many people think that small estates do not require probate. This is true in a technical sense, since Small Estate Distribution is technically not Probate. But since many people conflate Small Estate Distribution with Probate, they wrongfully believe that Small Estates (under $30,000 in personal property) require no formalities to transfer the decedent’s property to beneficiaries.
See 12 Del. C. §§ 1502–1504, 12 Del. C. § 2306.
2. Petitioning to Be the Personal Representative of an Insolvent Estate
Some Personal Representatives rush headlong into administering an estate without determining whether the assets of an estate are sufficient to pay its debts. There is nothing inherently wrong with administering such an estate, but a prospective Personal Representative should try to determine, before petitioning to become Personal Representative, whether an estate is solvent or not. Administering an insolvent estate presents unique concerns and challenges and will likely require more time and effort compared to a solvent estate. The Personal Representative will have to marshal the assets of the decedent and use them to pay the debts of the decedent. When paying debts of an insolvent estate, the Personal Representative must be careful to pay debts based on the correct priority.
See 12 Del. C. § 2105.
3. Using the “Small Estate” Method for Estates that Do Not Qualify
Only some estates are eligible for Small Estate Distribution. In Delaware, in order for an estate to qualify, the decedent must (1) not have owned any solely-owned real estate, (2) the decedent’s personal property (all property other than real estate) must be worth $30,000 or less, and (3) the estate cannot be insolvent. For the purposes of Small Estate Distribution “solely-owned real property” is not limited to property with only one name on the deed. Property held by multiple persons as Tenants in Common is solely-held real property that would exclude an estate from Small Estate Distribution.
Even for an estate that qualifies for Small Estate Distribution, there are frequently good reasons to use Probate instead of Small Estate Distribution. For instance, when an estate is Probated, most creditor’s claims against the decedent cannot be brought against the estate after 8 months from the decedent’s death. Using Small Estate Distribution (or any other method) could leave beneficiaries vulnerable to the decedent’s creditors for up to 10 years after the date of death. This is of key importance when the decedent was a professional, such as a surveyor or an architect who could be held liable for a mistake they have made years after the event that leads to the lawsuit.
A 2013 Delaware Chancery Court case highlights the creditor-protection benefit of Probate. In Cummings v. Estate of Lewis, Lewis (the decedent) conceived a child with Cummings (the mother) shortly before Lewis’s death. The child was born nearly nine months after his death. The mother attempted to assert a claim against Lewis’s estate for child support, but did not file her claim until after the child was born. The Court held that even a child support claim was denied since it was pursued more than 8 months after Lewis died. In a June 2013 opinion, the Court stated that “[t]he Probate Code … exists ‘to encourage a speedy disposition of assets by barring belated claims even if they are meritorious.’ “ If Lewis’s estate had not been Probated the Court would likely have reached the opposite result.
Legal claims against a decedent, for child support or otherwise, can lie dormant and undiscovered for years before a legal claim is found. Probate, when done properly, offers certainty that property distributed to beneficiaries will not be taken by future, unknown and unknowable creditors.
See 12 Del. C. § 2102, 12 Del. C. § 2306, 12 Del. C. § 2109.
See Cummings v. Estate of Lewis, 2013 WL 979417 (Del. Ch. Mar. 14, 2013).
4. Distributing Property Too Early
Understandably, many beneficiaries and Personal Representatives would like to transfer property from the estate to the beneficiaries and close the estate as quickly as possible. However, Personal Representatives typically distribute the estate assets after 8 months have passed from the date of death so that they know whether some of the decedent’s assets may needed to pay the debts of the estate. A Personal Representative could even be held personally liable to creditors or beneficiaries of an estate for distributing assets to the wrong person (and could be held strictly liable for an early distribution, which means that a Personal Representative can be held liable without considering whether they are at fault).
See 12 Del. C. § 2102, see Madden v. Phelps, 671 A.2d 870 (Del. Ch. 1995).
5. Personal Representative Neglecting His or Her Duty (12 Del. C. § 1541)
The Personal Representative of an estate is responsible for completing various tasks on behalf of the estate. The Personal Representative is responsible for filing various documents with the Register of Wills Office, discovering and safekeeping the decedent’s property, determining heirs and beneficiaries and providing notice to them of certain filings with the Register of Wills Office, paying taxes, fees and creditors on behalf of the estate and distributing the remaining assets to heirs or beneficiaries.
If a Personal Representative neglects his or her duties, such a Personal Representative could be subject to monetary penalties, removal from office and even contempt of court (under extreme circumstances). Serving as a Personal Representative is a serious commitment and is not to be taken lightly.
Given the responsibility involved, many Personal Representatives hire attorneys to help them understand their duties as a Personal Representative so that they will be able to administer the est
ate efficiently and minimize any risk of punishment for neglect of those duties. Attorney fees are generally paid from the estate’s assets, and such fees are an expense that offsets the closing fee for the estate.
See 12 Del. C. §§ 1906, 1541.