Handling Probate Property

Managing, Dealing With, and Selling Probate Property

The personal representative has a duty to manage and preserve the decedent’s property.  They also have to deal with the decedent’s property. In some cases, this may even include selling the decedent’s property.  While these actions are required, there is little guidance for how to carry out these actions.

Duty to Manage and Deal With Property

The standard for managing property is provided by the “prudent person” standard.  This standard looks to how a person would handle their own property. This includes keeping property in good repair, secure, insured, etc.  The goal is to avoid waste and prevent losses to the estate.

As a practical matter, the personal representative’s duty to manage and deal with property may be spelled out in the will.  The probate court may provide additional guidance. This is particularly true for dependent administrations (see our prior article on dependent administrations).  

Borrowing Money for the Estate

The personal representative generally cannot borrow money on behalf of the estate.  This includes mortgaging the estate property.

If this is needed, the personal representative generally needs a court order authorizing the loan or mortgage.  The law provides for certain notice to be issued prior to the court entering an order authorizing the loan or mortgage.  Absent court approval, the lender may be required to repay funds it received in repayment of the loan.

Renting or Leasing Probate Property

The personal representative is entitled to lease probate property for a period of one year or less.  A court order is not required. However, absent a court hearing, any party with an interest in the estate may challenge the rental or lease.  This usually involves challenges to the lease terms, such as below market rental rates for property rented to the personal representative’s friends or other family members.  The standard that is applied is whether the terms are in the best interest of the estate.

Selling Probate Property

The personal representative generally cannot sell the decedent’s property prior to the court approving the inventory and appraisement.  This is true even if the property is decreasing in value. It may be necessary for the decedent to obtain guidance from the court in these cases.  

The decedent’s will may provide another remedy.  The will may specifically authorize the personal representative to do this before an inventory is filed.  The terms of the will should be carefully scrutinized before the personal representative enters into any sales contracts.  

There may also be probate property subject to a valid security interest, such as a car subject to a title loan.  Once the probate proceeding is started, the security holder’s ability to foreclose or sell the property is limited.  They generally have to file an application with the court to obtain an order to sell the property. The personal representative cannot simply let the property be foreclosed on in these instances.

With these general guidelines in place, we can consider a few of the nuances that crop up with specific types of property.  Let’s start with the decedent’s cash and promissory notes first. Click here to continue reading.  >>>>

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