What to Expect from the Probate Process

8. Managing an Independent Administration

After the hearing and filing of the Oath, and the posting of a bond, if required, the person appointed in the Will has officially qualified as Independent Executor or Administrator of the estate.  An “Executor/Administrator” (masculine) or “Executrix/Administratrix” (feminine) is the legal representative of an estate, the person appointed in a Will to carry out the testator’s wishes as expressed in that Will and to administer the estate. An “Independent” Executor or Administrator  acts independently of the Court’s control, except with respect to those matters which have already been accomplished (i.e., filing an application for probate and being appointed independent executor) and the filing of the required Inventory, Appraisement and List of Claims (which we will discuss later).  The opposite of an Independent Administration is an Dependent Administration which requires all of the duties and actions of the Executor or Administrator be pre-approved by the court, which is cumbersome, time-consuming and expensive.

An Independent Administration is unique to the State of Texas, and it will greatly facilitate the administration of this estate.  An Independent Executor or Administrator has broad powers, limited only by the Will and the Texas Estates Code. An Independent Executor or Administrator is authorized to do, without court approval, all things authorized by the Will and all things which an ordinary Executor or Administrator would be permitted to do only with court approval.

Letters Testamentary or Letters of Administration are documents issued by the court clerk after a hearing. They formally confirm the appointment of an Executor or Administrator and serve as proof of their legal authority to act on behalf of the estate. We will order these Letters after the hearing. Please keep in mind that Letters are only valid for sixty (60) days each time the Clerk issues them, as required by the Texas Business and Commerce Code.  Thus, as a rule, we do not order more than is needed after the hearing. Letters cost $2.00 each.  If your Letters expire and you need additional Letters, please give us a call and we will order additional Letters.

Simply stated, the administration of a probate estate involves the collection of all assets owned by and all claims owing to the decedent, the payment of all debts, liabilities, claims, and expenses owed by the decedent or the estate, and finally, the distribution of the remaining assets to the beneficiaries entitled thereto pursuant to the Will.  If the Will provides for the distribution of real estate, we will assist by preparing and filing deeds in the appropriate counties. 

The admission of the Will to probate can be challenged for up to two (2) years from the date it was admitted to probate.  If challenged, the court could order the Executor or Administrator to account for all actions For this reason, before you make any distributions out of the estate, please let us know so that we can determine whether it would be beneficial to coordinate the distribution through our office, which would involve preparing an informal accounting  and requesting  “Receipt and Releases” from the beneficiaries to keep them from challenging the Will after they receive their portion of the estate

9. Executor and Administrator Powers and Duties 

The appointment as an Independent Executor or Administrator grants broad powers which are coupled with very high fiduciary duties that are designed to protect the interests of the beneficiaries of the estate, the taxing authorities, and the estate creditors. 

General Guidelines 

Briefly stated, Executors and Administrators should observe the following guidelines at all times:

• Keep the beneficiaries of the estate reasonably informed of the administration and use best efforts to promptly collect the assets and administer and settle the estate
• Always be in a position to account for all revenue received, moneys spent, assets sold (or for some reason purchased), and as to all other matters that directly or indirectly affect the estate.  We recommend that you keep a spreadsheet of all estate activity.
• Do not commingle the estate’s property with their own or that of any of their businesses.  Commingling usually is done with cash, and it is imperative that an executor never commingle estate funds with funds that are not part of the estate, not even for a day
• Do not leave estate funds uninvested
• Do not engage in any self-dealing with estate assets

Compliance with these guidelines can be accomplished by setting up appropriate estate accounts and handling the estate accounting matters in the manner we will discuss in more detail below. 

Accounts and Records

The best way to handle accounting matters is for the estate to open one or more accounts at a bank and/or trust company of the Executor’s or Administrator’s choosing, and then place all the cash and investment grade assets into that account.  It is also common to leave investment assets at the institution where it was located at the time of decedent’s death, but in the name of the Estate. The first step in setting up the estate account is to obtain a separate taxpayer identification number or EIN for the estate. 

The Estate TIN is a unique number issued by the IRS to identify a decedent’s estate for tax and financial purposes. In Texas probate, the TIN is required to open estate bank accounts, file the decedent’s final tax returns, and manage other estate financial matters. It functions like a Social Security number for the estate and is obtained by the executor or administrator after their appointment. After the hearing, we will obtain this number from the IRS on your behalf.  This new number should be used as the taxpayer identification number [link to EIN definition] for the estate’s accounts. 

The next step is to establish an estate account agreement with the bank or trust company of your choosing.  The account should be styled as follows: 

One Executor or Administrator:

“NAME OF EXECUTOR OR ADMINISTRATOR, Independent Executor or Administrator of the Estate of _________________, Deceased”

Co-Executors or Co- Administrators:

“NAME OF EXECUTOR or ADMINISTRATOR 1 & NAME OF EXECUTOR or ADMINISTRATOR 2, Independent Co- Executors or Co- Administrators of the Estate of _________________, Deceased”

It is important to see that all cash received and expended for the estate passes through the estate account.  Generally, the account will operate as follows: 

• As estate revenue is received, be it dividends, interest, sales proceeds, or other revenue, the revenue should be deposited into the estate account, and the exact nature of the deposit should be identified in the account ledger. 
• All estate disbursements should be made from the estate account, and a detailed record should be maintained of all distributions. 
• As we will discuss below, the Executor or Administrator may have paid some estate expenses to date, including funeral expenses and debts outstanding at the date of death, from their own separate funds.  Those estate expenses should be reimbursed after the account is opened. 

If the above routine is followed consistently throughout the administration of the estate, the Executor or Administrator will be able to utilize the account statements as the primary resource for information regarding estate receipts and disbursements.  We also will be able to note any sales of any non-investment grade assets, such as a car, if the proceeds are placed into the account.

Insurance

It is the duty of the Executor or Administrator to insure the estate property against loss and liability.  We suggest that you carry liability insurance on real property and any other estate property which warrants such coverage.