When some estate assets are not included in the administration of the estate, and are discovered after the estate is closed, it can cause chaos. In many cases, during the original administration of the estate, many of the family conflicts that arose were finally settled. When new estate assets are discovered, all of those wounds may be reopened as the fight begins again, especially when the new assets are valuable.
This happened in a case decided by the Arkansas courts only a couple of years ago. At the time of his death, the deceased lived in Tennessee and his probate estate was opened there. He did have some property in Arkansas, so an ancillary proceeding, used when there is property is another state, was opened in Arkansas. Because the Arkansas property was not of much value (a small mineral interest in 85 acres in Conway County), no creditors filed any claims in Arkansas, so the ancillary estate was closed and everything transferred back to Tennessee. The estate was closed in 1996 and in fact was even determined to be insolvent (not having enough assets to meet its debts).
A decade later, it was discovered that the deceased actually held an interest in mineral rights on about 4800 additional acres which, in the meantime, had become a major estate asset with Arkansas’s natural gas industry. The ancillary estate in Arkansas was reopened but again no creditors filed a claim. Another decade later, an Arkansas court allowed the executor to lease the oil and gas rights with a cash bonus of $1 million.
At that point, as you would expect, long-forgotten friends, relatives and creditors emerged to make claims against the estate assets. Because of the newly-discovered property, the court reversed the previous finding that the estate was insolvent and allowed the new claims against the estate to be heard.
While there may always be some assets or even liabilities missed that should be included in the estate, the better the planning, the less chance that this will occur. There may also be options such as a trust that can hold an estate asset such as this. But the key is a consultation with an estate planning attorney who knows the right questions to ask before the death of the owner of the assets that will help uncover any long-forgotten items that should be included. Or with a discovery like this, even provide income or assets that the deceased could have enjoyed during the years before his death.
- Estate Planning is Essential Whether You Are Married or Not - April 25, 2018
- Income Tax Basis in Estate Planning – Part 2 - April 23, 2018
- The Downsizing Generation: How to Handle a Surplus of Stuff When a Loved One Ages - April 18, 2018