Final Accounting in a Probate

Below is the materials from a recent class that I taught for probate attorneys.  It may help you know what to expect and how to prepare for the final accounting in your own case.

 

PUTTING THE CASE TO REST, CLOSING THE ESTATE

 

 

The Petition for Distribution and Approval of the Final Account in a probate case must be on file with the court at least twenty (20) days before the court may approve the petition and enter an order of distribution. Notice of the Hearing on that petition must be mailed to all of the heirs and must be published once each week for two weeks in a newspaper in the county where the probate is pending. See 58 O.S. § 553. The Notice of Hearing must be sent to the heirs at least ten (10) days before the hearing. As a practical matter, it probably should be mailed at the time it is filed; a ten-day delay between filing the notice and mailing it to the heirs should raise suspicion.

If you want to be particularly careful, I suggest that you give notice of the final hearing to any creditors, if any, whose claims you disapproved during the course of the probate. You would, of course, also include that creditor’s name and address on your affidavit of mailing for those notices.

This final hearing gives a last opportunity for the airing of all issues. At this hearing any person interested in the estate may appear and file a written exception to the accounting and contest that accounting. See 58 O.S. § 554. I would note that the statute appears to require that only someone who actually has an interest in the distribution of the estate may raise an objection.

 

FINAL ACCOUNT

Title 58 O.S. §612 indicates that the executor or administrator of an estate should render the final account when the estate is in a proper condition to be closed. Generally that means the notice to creditors has expired, the bills have been paid, and the taxes have been filed and paid.

The Accounting should include a statement that shows the income of the estate, the expenses of the estate, the claims presented against the estate, and all other financial matters necessary to show the condition of the estate. See Title 58 O.S. §541.

In order for your client to be able to prepare such an accounting, it is probably important that you properly tutor your client at the beginning of the matter on retaining good records and receipts for payments out of the estate monies. Note that it is possible to waive the detailed final accounting. In my experience, however, it is often more work to waive the accounting than to prepare the accounting. If, however, the final accounting is waived, Title 58 O.S. § 541 states that it is sufficient that the personal representative state under oath that (a) all income has been properly received and expenses lawfully paid (b) all allowed and approved claims have been paid (c) all funeral expenses, taxes and costs of the administrator have been paid and (d) the estate is ready for closing.

I suggest that final accountings should be waived in relatively rare occasions. Where you have prepared and filed a final accounting, mailed it to the heirs and the court has entered an order approving the accounting, it will be difficult, probably impossible, to convince a judge that the personal representative failed to comply with the requirements of the law in the distribution of the estate.

There are times when it is ill advised, and possibly malpractice, to waive a final accounting. First, where there is lack of trust between the personal representative and the heirs and legatees it is important that there be an accurate and complete paper trail demonstrating what occurred during the administration of the estate and that the rights of all parties have been treated fairly. Second, when the estate is unable to satisfy all of its claims, expenses and/or distributions under the will, the filing of the final accounting can help make it clear to the heirs, beneficiaries, and even creditors, why they are not receiving the item or sums that they believe they should receive.

It will also be necessary to complete a final accounting if any heir later revokes his or her consent to waive the final account. Note that 58 O.S. §239 allows waivers and consents to be withdrawn at any time by the filing of a written statement of withdrawal with the court clerk and by serving a certified copy of the withdrawal on the personal representative or her attorney by certified mail. If that happens, all further actions of the personal representative should be taken as if there never had been waivers or consents filed. Effectively, any single heir or legatee can revoke the consent of all the heirs and legatees.

There are likely to be many cases where consents and waivers cannot be obtained. Perhaps the heirs are under the age of majority, their locations may be unknown, or an heir does not trust the personal representative. In such a case, it is not feasible to waive accountings under 58 O.S. § 239.

 

WHO IS ENTITLED TO RECEIVE THE FINAL ACCOUNT

Title 58 O.S. § 553 requires that the Notice of Hearing on final account be given by mailing written or printed copies of the Notice of Hearing to the heirs, devisees and legatees. Many attorneys and judges read this statute to require only the notice be mailed to the heirs and legatees. However, a careful reading of cases involving probate and the principles of due process, will lead the careful practitioner to provide the heirs a copy of the Accounting and Petition to Distribute, possibly in the same mailing with the Notice of Hearing. If the practitioner does mail both the Notice of Hearing and Final Account and Petition to Distribute to the heirs, he or she should note both of those documents on the Affidavit of Mailing, which will be prepared and filed in the court file. Consider the case of Booth v. McKnight 2003 OK 49, 70 P.3d 855, which advises that the principles of due process require the personal representative or her attorney to give adverse parties notice of the actions pending before the court, and what is likely to result in the absence of any objections.

 

DISTRIBUTION OF THE ESTATE

The statutory distribution provisions, as related to final distributions are addressed in Title 58 O.S. § 611. Some practitioners may distribute the estate prior to the order of distribution, and then immediately file receipts and releases from the heirs after the judge has entered the final order of distribution. I find it to be far better to distribute nothing from the estate until the signed order is in hand. The benefit of the heirs receiving their inheritance a few days earlier is far outweighed by the stress that would occur if someone appears and objects to the proposed distribution.

Three months following the issuance of letters of personal representative, an heir, devisee, or legatee may request the court to distribute his or her portion of the estate under the 58 O.S. § 621 and 624. This is rare in my experience, but provided that the distribution can be accomplished without impairing the rights of creditors, the court may grant such a request.

 

TAXES AND TAX RETURNS

58 O.S. § 635 requires the court to be satisfied that all of the state, county, school and municipal taxes and all income and estate taxes due the state of Oklahoma have been paid in full before any decree of distribution is entered. The final income tax return for the decedent is due by April 15th of the year following his or her death, so long as the income of the decedent was sufficient that he or she was required to file or if a refund is likely to be received. It is sometimes valuable or beneficial for the decedent’s spouse to file a joint return and to consult a tax accountant if there is reason to believe that the net tax liability will change.

The estate itself may have to file tax returns for each year until the estate closes. If fiduciary returns are due, the estate must obtain a tax identification number. That can currently be done on the IRS website at www.irs.gov.

An estate tax return will be required for the federal estate taxes if the estate exceeds 5.43 million dollars in 2015. Currently, Oklahoma does not require estate tax returns, as we are not now charging and collecting estate taxes. Please note, however, that if the decedent in your case passed away before January 1st 2010, you may need to file an Oklahoma estate tax return.

Terrell Monks

Terrell Monks: Guiding Oklahomans through Estate Planning and Probate for longer than he cares to admit.  Call the office at 405-733-8686

 

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