TRACKING THE MONEY - PART 4 - CLOSING THE ESTATE
Attorney and representative fees.
Since you are listing amounts in a final account as final figures, how do you deal with fees? I determine the fees I have charged to date and estimate what I expect to charge through closing of the estate. My client does the same. We then add those final fees to the disbursements as amounts "to be paid." They are not paid until all parties approve, but by including them in the disbursements, they will be taken into account in calculating the distributions after payment of fees. In supervised estates, the court needs to approve the fees first or simultaneously with presentation of the account. That poses a different issue. If the account is not a final account, you can petition for fees, pay the fees after they are approved, and reflect the payment in the next account. If the account is a final account, you must either estimate the final fees as above or you can show that the amounts that you expect to distribute are subject to reduction for fees yet to be approved by the court and paid.
Additional earnings after the date of the Account.
How do you deal with additional earnings on estate assets after the end date of the account? On any asset that continues to earn income, I add the language "plus earnings to date of distribution." The same language goes after the Total Receipts and after the amount Available for Distribution. When distribution is actually made, I prepare a supplement to the account showing the distribution amounts from the account and adjusting for actual later earnings. That provides the distributees and the estate's accountant with the necessary information of additional earnings. One caution: you cannot complete the process until you actually stop the interest earnings. In particular, if you have an interest-bearing checking account, you need to arrange with the bank to stop the interest, or you will always be chasing a moving target, and you will never be able to finally close the account.
Which comes first, the receipt or the check?
Cook County requires receipts to be signed and filed before the estate can be closed. When I send out the final account and receipts to the interested parties, I explain Cook County procedure. I ask the distributees to return the receipts even though they don't have their money yet and tell them that as soon as I have ALL of the receipts, we will make distribution. (That is also an incentive for people to act quickly.) Once in a while, I have to make it a two-step process and obtain only an approval of the account before the check is actually sent. In either case, once all interested parties have consented, we can stop the interest running and make distribution, even if the estate has not been closed in court. Note: until all parties have consented, it is not safe to distribute to anyone, since objections and additional proceedings may significantly change the numbers.
Closing an estate in independent administration is very simple. You need to give the court a Final Report of Independent Representative, a Receipt and Approval on Closing of Independent Administration for each distributee, and an Order of Discharge. These forms are each different from the forms for supervised administration. In Cook County, the Receipt must show the total fees paid to the representative and the attorney so as to show that those fees have been specifically approved by each distributee. The Final Report is a court form but can and should be tailored as necessary. Be aware of the last item, No. 11. That is the place to indicate if any legatees have died, if any receipts have not been obtained, or if anything else is out of the ordinary or not completed.
What happens if you cannot get a receipt or if the estate is insolvent and all claims have not been paid? §28-11(e) of the Probate Act provides the mechanism. You can file the Final Report, send appropriate notices to all interested parties who have not consented and to all creditors whose claims have not been paid in full and start the running of a 42-day period. If no objections are filed within 42 days after the filing of the Final Report, the estate can be closed.
In supervised estates, formal notice must be given to each party who does not specifically consent and receipt for a share, to each unpaid creditor, and to each other party in interest. Additional language must be added to the general Notice of Motion form for approval of the accounting to be binding on all interested parties. Notice under the Probate Act is merely to be as the court requires. Cook County rules require at least ten days' notice prior to hearing on the account. Vouchers are individual receipts for disbursements and are required only in supervised administration, not independent. You must file either vouchers or a Certificate in Lieu of Vouchers (certifying that the vouchers are in the possession of either the representative or the attorney for the representative) with each account. Obviously, the certificate is much faster and easier. In addition to the account and vouchers or a Certificate in Lieu of Vouchers, you will need a Receipt from each distributee and an Order of Discharge. Be sure that the forms are those for supervised administration.
Deposit with the County Treasurer.
In both independent and supervised administration, when you cannot get a receipt for any distribution, you still need to dispose of the funds held. The mechanism is to deposit the funds with the county treasurer. In each case, you need to file with the court a receipt for the deposit from the county treasurer. There is one minor difference between independent and supervised administration. In supervised administration, since the account is approved by the court, the amount of the distribution will already be shown in the account. In independent administration, you should show the amount to be distributed (plus earnings . . .) in No. 11 of the Final Report.
The Norris Rule.
The Norris Rule is taken from a case of the same name. Cook County may be the only county which requires the opposite of the rule (Cook County Rule 12.13(c)(ii) and (iii)). If part or all of an estate is to be distributed to a trust and if each trustee is also a representative of the estate, each income beneficiary of the trust must approve the final account or the representative must certify to the court under oath that notice was either given to or waived by all beneficiaries. Additional requirements are found in the Rule itself. The purpose of the Rule is to prevent self-dealing in situations where one group of people prepare the accounts and then approve the same accounts. If the trustees of the trust are the same as the representatives of the estate, you must read and comply with the Rule. No. 11 on the Final Report should address the issue over the sworn signature of the representative.
Despite the technicalities, procedures, and other matters to consider, a few basic rules can take you a long way. Get information on the estate's assets as soon as possible and as you go along. Don't wait to the end to try to reconstruct missing or incomplete information. Double-check all final accounts and figures against the actual amounts in the estate. If there is a shortage, it may come out of your pocket. Give more details rather than less to the interested parties. Remember that the representative has fiduciary duties to each beneficiary and legatee. If any questions are raised, open up the records and give full disclosure. Finally, as a now-retired judge used to say, be sure you get paid.
© 2001 by Cary A. Lind, all rights reserved
Cary A. Lind, P.C.