Can You Close an Estate if a Lawsuit Has Been Filed?

by Beverly Bird
A lawsuit can stop probate in its tracks.

A lawsuit can stop probate in its tracks.

Marili Forastieri/Photodisc/Getty Images

Nothing snarls and slows down probate quite like a pending lawsuit. Probate ties up the loose ends of a decedent’s life. If someone files a lawsuit as part of the proceedings, the estate generally can’t close until the issue is resolved. Your immediate family members might receive allowances -- money off the top of your estate to tide them over -- if this is provided for by law in your state, but otherwise, your beneficiaries may not receive their gifts for a while.

The Purpose of Probate

If you’re like most people, you own some property and owe a few debts. Your death doesn’t necessarily extinguish the debts and if you own property in your name alone and haven’t made other arrangements to transfer it to beneficiaries, probate becomes necessary. The executor you name in your will is responsible for submitting the document to the probate court for validation. Then, she’s charged with collecting and valuing your property and notifying your creditors that you’ve passed away. Any interested party -- someone who is directly affected by the disposition of your estate -- can file a lawsuit to protect their interests during this process.

Denied Creditor Claims

Unhappy creditors are a common cause of probate lawsuits. When your executor notifies them of your death, creditors have a limited period of time -- usually a few months, but up to a year in some states -- to present their claims to the estate for payment. The executor must determine if the claims are legitimate. If she decides one or more of them are not, she can decline to pay them. When a claim is denied, the creditor can file a lawsuit with the probate court, asking the judge to overrule the executor’s decision. Your executor can’t close the estate until the court gives its verdict. If she makes distributions to your beneficiaries and the court upholds the creditor’s claim, she would have nothing left in the estate with which to satisfy the debt.

Will Contests

Unhappy heirs present another possibility for probate lawsuits. If you disinherit someone who expected to receive a share of your estate, or if you leave someone just a nominal amount, that individual may be able to file a lawsuit with the court, asking that your will be invalidated either in part or entirely. The rules for who can to do this vary by state, but they usually include close relatives. If the will challenge is successful, it could dramatically change the nature of your bequests, so your executor can’t close the estate until the issue is resolved. One way you can avoid this is to include a no-contest clause in your will, also called an in terrorem clause. This option isn’t available in all states, but in those that allow it, you can state that if any heirs contest the terms of your will, they forfeit their inheritances and receive nothing from your estate.

Wrongful Death Suits

Another complication that could give rise to a lawsuit during probate involves the nature of your death. If it was due to an accident that occurred due to someone else’s negligence, your executor may be able to file a lawsuit for damages. She would do so in civil court, not probate court, but if the lawsuit is successful, the proceeds would typically go into your estate. If the estate closes prematurely, there’s no legal entity to “catch” the money when the case is settled or after a trial and transfer it to your beneficiaries. Rules for this can vary somewhat from state to state. In some, a surviving family member, such as a spouse, may be able to file a wrongful death lawsuit directly without involving the probate proceeding.