Cash & Promissory Notes

The Decedent’s Cash and Notes

Probate property often includes cash the decedent owned. This includes actual dollar bills and money held in checking, savings, and other financial accounts. Probate property can also include promissory notes for money the decedent lent to others.

Physical and Digital Currency

The personal representatives and others with an interest in the estate wonder whether dollar bills have to be included in the probate process.

The short answer is yes; however, the decedent’s cash is often used to pay for the decedent’s funeral and last affairs. We have previously explained that these amounts often get first priority in the probate process. We have also previously explained that receipts should be obtained and kept for every expense for the estate–including cash transactions.

It is also advisable for the personal representative to set up a bank account for the estate. This can be an entirely new checking account or it may involve changing the name with the bank for the decedent’s bank accounts. This makes it easier to track the items of income and expense for the estate and to avoid disputes over who paid what expense and who is entitled to reimbursement. It also makes it easy for the personal representative to track any other funds or assets that belong to the estate.

When establishing bank accounts, the personal representative also has to consider FDIC limits. Bank accounts are only insured up to $250,000 per depositor. The personal representative may be liable for any loss incurred due to keeping more than this amount in any one bank.

Promissory Notes

Promissory notes can present additional challenges for the personal representative.

If a decedent owned a promissory note, the personal representative will be entitled to and has a duty to collect any payments due on the note. The personal representative should also obtain a copy of the original promissory note. The personal representative will want to carefully examine the terms of the note to:

  • Notify the borrower that payments are to be made to the estate and provide instructions for this (this is usually done by providing written notice along with a copy of the letters testamentary appointing the personal representative).
  • Ensure that the right amounts are paid and that they are paid on time.
  • Enforce any rights to missed payments or interest and issue the correct tax forms for interest paid.

If there is a deed of trust or vendor’s lien associated with the promissory note, the personal representative should review those terms too. These documents may require the personal representative to take some action or to make a filing to release or modify the documents.

Then, as part of the probate estate settlement, the personal representative will have to consider whether the note can or has to be sold or whether it is to be held and then eventually distributed to the heirs. We’ll address this topic later in this guide.

After cash and promissory notes, the next asset that poses challenges for the personal representative is real estate the decedent owned.  That brings us to our next topic.  Click here to continue reading.  >>>>

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