What Happens if No One Moves to Settle an Estate?

By Anna Assad

Once a person dies, a loved one usually files a petition in probate court to start proceedings to settle the estate. Estate settlement involves appointing a person to manage the estate -- an executor if there's a will, an administrator otherwise -- including final bill payment and distribution of the deceased's property. If no one files for estate proceedings in court, what happens next depends on the type of property the deceased, known as the decedent, owned, whether he had debts and state law.

Estate Losses

Some or all of the estate's assets may be lost if no one files for estate proceedings in court. For example, if a decedent owned a home with a mortgage, because no one is working on the estate, the mortgage won't be paid and the lender will foreclose on the home. Further, the person handling the estate usually secures the decedent's valuable property such as a car. If no one has taken any action on behalf of the estate, valuable items be may damaged or lost. A car, for instance, may be deemed abandoned property by the state if left parked for an extended period of time.

Creditor Action

State laws don't allow creditors to file claims against an estate once the deadline for the claims passes. For example, claims against the estate of a Florida resident must be filed within two years of his death. A creditor of the decedent may file a petition to start estate settlement proceedings if the decedent's relatives don't file. A creditor of the decedent with a valid claim has a legal interest in the estate because payment of the debt comes from the estate's assets. State laws differ on procedures and deadlines. A creditor often files a petition for administration, which is used when a decedent doesn't leave a will, because the creditor has no way of knowing whether the decedent had a will or its location. Because the creditor has to list the decedent's heirs on the petition, he may have to investigate the decedent's family history. The court may appoint a public administrator to manage the estate if no relatives step forward after the creditor files a petition.

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Necessity of Proceedings

State laws differ on when formal estate proceedings are necessary. Some estates don't require court proceedings; these include the estate of a decedent who left no assets or only left property that isn't subject to state probate laws like property in joint tenancy. For example, if a brother and sister own a house together as joint tenants, and the brother dies without having any other assets or debt, because they were joint tenants, the brother's ownership interest automatically passes to his sister at death, leaving an estate with no assets or debt to settle. Assets that pass outside of probate commonly include life insurance proceeds and retirement accounts; these assets go to the person the decedent named as beneficiary on the plan paperwork.

No Heirs

If an estate is opened by a person other than a relative or beneficiary, such as a creditor, the court-appointed administrator has to confirm and try to locate all heirs. The estate may have assets left after all creditors are paid, and the heirs have a right to the assets. If there are no heirs or the court can't find them, what happens to the assets depends on state laws. Usually, the estate goes to the state of residency of the decedent. For example, if a person in Colorado dies without a will and the public administrator can't find any relatives, the state gets the assets.

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References

Related articles

What Are the Requirements for Settling an Inheritance?

The probate process is designed to determine the disposition of property left behind when someone dies. The local probate court oversees the probate process, and an executor handles day-to-day administration of the probate estate. If the decedent left a valid will, the probate court generally respects the terms of the will. If not, state law will determine the distribution of assets.

Michigan Death Estate Settlement Procedures

When someone dies, her estate must be settled. The settlement process includes following the terms of the will, paying off the deceased's debts and taxes, selling or giving away her property, and dealing with the probate court. In Michigan, the person who oversees estate settlement is known as the personal representative of the deceased; this person is either named in the deceased's will or chosen after her death by the probate court.

Financial Obligations of Heirs

The responsibility of paying a debtor's bills after death falls on the estate rather than on heirs receiving an inheritance. After a death, the executor of an estate is responsible for notifying creditors and paying existing debts using funds available to the estate, either with cash or liquidated assets. Although heirs will not be paid an inheritance until after debts are fulfilled, they usually do not have any financial obligation to creditors.

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