How Does A Personal Representative Deal With Special Assets In A Florida Estate?

Posted By on March 16, 2016

While it is true that you can’t take your assets with you, you certainly can control how your affairs are handled after your death. The provisions of a Last Will and Testament can not only control the distribution of assets, but it can also direct how assets are to be cared for or disposed of to protect other assets of the estate. Rest assured, Florida probate judges want a decedent’s Will provisions followed.

Accordingly, a Personal Representative for a Florida Estate has a legal duty to follow the provisions of a Will as written;  a personal representative can not administrate an estate according to what is easiest for them to do. A Personal Representative must follow the directions in a Will, without consideration of their own self-interests.

This rule is true even if though not all assets are the same.  Some assets may need special attention, liked being stored in an air condition controlled facility. Meaning, a personal representative may have to make some decisions that can cause controversy between beneficiaries, creditors, and the Personal Representative (like selling some assets to preserve others). These decisions can even lead to allegations of breach fiduciary duty against the Personal Representative — fortunately, past case precedent as well as the Florida Probate Code and rules provides guidance for Personal Representatives on how estates should be administered no matter how strange or special estate assets may be.

 

Wine bottles in a rack

What about the wine collection?

Dealing With Special Assets

Once a Personal Representative accepts the task of overseeing an estate and making sure the decedent’s wishes are carried out, as written in the Last Will and Testament, that person will soon discover that the decedent owned all sorts of things. Most people do.

For instance, homestead property as well as investment properties, like rental houses or commercial property, are common assets here in Florida. Cars, trucks, and other motor vehicles as well as recreational vehicles (e.g., motor homes, travel trailers) and boats are also likely to be included on an inventory of a Florida estate.

However, many people own different and unique kinds of property that may need special care and treatment. By their very nature, these assets will need attention and care from the Personal Representative that other kinds of assets will not demand. And, because of their particular characteristics, there may be times when the Personal Representative’s duties may require a tough call in deciding how best to handle those assets.

Unique Assets May Mean Tough Calls for the Personal Representative

Sometimes, the Personal Representative will have a hard decision to make: follow the black letter of the Last Will and Testament regarding the special needs of some assets versus other assets, in order to protect the overall value of the estate and, ultimately, the inheritance of the beneficiaries and the debts owed to creditors.

When can this happen — what kinds of assets create these kinds of problems? These strange or special assets can come in several forms, such as Wasting Assets; Perishable Property; Under-productive Assets; and Non-productive assets.

1. Perishable Assets

Assets that can perish if left without attention of some sort are considered to be “perishable property” of the estate. Immediately upon discovering that the estate owns perishable property, the Personal Representative needs to take action.

First of all, perishable assets must be located and secured. Then, steps must be taken to keep the perishable assets safe from harm.

Perishable assets can include fine wines and other assets that are vulnerable to losing their usefulness or their value if left unattended. In Florida’s climate and weather conditions, the heat and humidity (particularly in the summer months) may harm or destroy assets, including fine fabrics, pieces of artwork, metalwork, and other valuables. Assets may be considered perishable property here that might not be perishable and vulnerable in other states or in other environments.

What if the cost of securing and storing these perishable assets is expensive relative to other assets of the estate?  What happens if there is little or no liquidity in the estate to pay for these costs? These type of issues are examples of problems a Personal Representative can face when dealing with special estate assets.

The personal representative will have to decide whether to spend money to store and protect the perishable assets, or to sell the perishable property quickly in order to cut storage costs for the Estate. If the Personal Representative decides the best course is to sell the perishable property, then he or she can do so without seeking a court order approving the sale (if the Letters of Administration are not restricted – meaning, the Court hasn’t stamped the Letters with language stating that all asset sales must be approved by the Court). See, Florida Statute 733.603. However, many Personal Representatives may find it the more prudent course to go ahead and bring the matter up before the Florida probate court, and have the protection of the judge’s approval before they sell the perishable asset.

2. Wasting Assets

Wasting assets are property that lose value over time, or will lose their value as they are used. Examples include cars and trucks owned by the decedent.

Wasting assets are drains on the estate’s bottom line; therefore, the prudent thing for a Personal Representative to do is sell the wasting assets or otherwise dispose of them as soon as possible to minimize the loss to the estate that holding onto them would incur.

However, what happens if these are specifically mentioned in the Last Will and Testament? Or, what if these wasting assets produce income, or they have other financial consequences?  There may also be tax considerations of holding onto assets versus disposing of them.

If an asset produces enough income to cover its upkeep, then maybe it shouldn’t be sold right away. What kind of asset might that be? A patent owned by the decedent might be an example here. Other wasting assets include any rights in natural resources like oil and gas, or other mineral rights (e.g., natural gas or timber), that diminish in value because of removal or depletion; others include securities-related assets like call options (or puts) that will expire on a certain date and time.

3. Non-Productive or Under-Productive Assets Owned by a Florida Estate

When a Florida Personal Representative is evaluating all of the estate’s assets, he or she should be evaluating the assets with an eye towards what is in the best interests of the estate (and its interested parties, the beneficiaries and creditors). This is the essence of the Personal Representative’s fiduciary duty to the estate (the breach of which makes her personally liable to the beneficiaries and interested parties; for more on these duties, see our earlier post).

Which means that when the Personal Representative discovers an asset that is not productive or that is under-productive, then he or she needs to make some decisions regarding that piece of property. These kinds of assets include stocks and bonds, and other financial instruments, as well as property that may have an expense accompanying it (such as a piece of artwork that is being insured).

Under Florida Statute 733.612 (l), a personal representative may “… [r]etain assets owned by the decedent, pending distribution or liquidation, including those in which the personal representative is personally interested or that are otherwise improper for fiduciary investments.” So, if the Personal Representative decides that keeping the asset for distribution is the best decision in the circumstances, then by law, he or she need not sell it even if it is non-productive or it is under-productive.

There are times when sentimental value must be considered, even if it does not impact the bottom line. The landscape painting that the decedent displayed over the mantle may no longer be in vogue, but the decedent’s granddaughter has fond memories of it and considers it to be priceless.

Additionally, under Florida Statute 518.11 (”the prudent investor rule”), there are times when the Personal Representative can legally hold onto under-productive assets when doing so makes good financial sense. Acting as a prudent investor on behalf of the estate, the Personal Representative must exercise reasonable care to oversee the estate’s entire investment portfolio as a whole. If there are some stocks or bonds or other financial instruments within that portfolio that are under-productive, taken by themselves, then they may be considered “under-productive assets” of the estate.

Still, if the Personal Representative has a reasonable basis for considering the asset to be valuable to the investment portfolio as a whole, given the facts and circumstances prevailing at the time, then the Personal Representative may keep that asset within the estate despite its questionable performance. The key here is considering the entire portfolio and its performance, not each asset independently of the other.

Another situation: securities in closely held business entity. Here, the problem may be solved because they may be tied to a redemption agreement between the decedent and the company; often, there will be life insurance policies on the decedent with the company as beneficiary to pay for the liquidation of the interest. However, if the decedent was actively managing or operating this business at the time of his death, then the Personal Representative may have more to do than just seeking to liquidate the interest.

Here, these securities have to be evaluated for their productivity. If they are non-productive or under-productive to the estate, then the Personal Representative must evaluate what is best for the interested parties. It may be that the heirs want to continue with the business, operating it themselves. If so, then the securities should be retained. Otherwise, it may be best to sell the securities for the benefit of the estate, or to dissolve the entity itself and then sell off its assets.

Questions Or Concerns About A Special Asset Owned By A Florida Estate?

If you or a loved one are aware of an unusual or special asset owned by a decedent in an estate in which you are an heir or beneficiary, or maybe it’s part of an estate that you are owed money as a creditor, then you may need to learn more about that asset and whether or not the Personal Representative is taking the proper action regarding that asset. It is possible that you may need to seek the help of the Florida Probate Judge in objecting to what is being done by the Personal Representative and stopping the asset from being sold or disposed of in other ways.

An experienced probate lawyer can help you here. And the cost of having a Florida probate attorney go over these things with you can be much less in time and money than many people assume to be the case.

A good piece of advice if a loved one has passed away and there may be an issue with their assets, is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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