Minnesota Probate Administration

Minnesota Probate Administration

Minnesota Probate Administration

Minnesota Probate AdministrationDuties of Personal Representatives

Once a Minnesota Personal Representative has been appointed by either a judge, or a probate registrar, the duties of the Minnesota Personal Representative will include, but not be limited to:

  • taking possession and making an inventory of the decedent’s assets, and reporting the same to the court – if required, and to the persons who are legally interested in the estate;
  • providing notice of the probate proceeding to the proper Medical Assistance officials;
  • filing all tax returns on behalf of the decedent and his or her estate, and paying all required taxes;
  • paying all of the decedent’s debts in the required manner, to the extent that there are sufficient assets to do so;
  • distributing any assets remaining after payment of the decedent’s taxes and debts to the persons entitled to such property, either pursuant to the decedent’s Will, state law, or court order; and
  • closing the estate in a manner most appropriate to the situation.

Minnesota Probate Administration Creditors’ Claims

One of the purposes of probate administration in Minnesota is to allow the decedent’s creditors an opportunity to:

  • file claims for payment of any outstanding debts with the court, or
  • present such claims to the Minnesota Personal Representative.

Minnesota Probate Administration Definition of “claims”

Minnesota Statutes provide the following definition of “claims”:

“Claims” includes liabilities of the decedent whether arising in contract or otherwise and liabilities of the estate which arise after the death of the decedent including funeral expenses and expenses of administration.

The term does not include taxes, demands or disputes regarding title of a decedent to specific assets alleged to be included in the estate, tort claims, foreclosure of mechanic’s liens, or to actions pursuant to section 573.02.

The County Medical Assistance office is always a potential creditor of the estate.

Minnesota Probate AdministrationPersonal Representative’s Duties with Respect to Creditor’s Claims

In addition to the initial mailed or published notice of the probate proceeding, some creditors will also be entitled to a supplemental personal notice by United States certified mail – pursuant to judicially determined requirements.

If such supplemental notice is not provided, the statutory time period for the filing or presentation of claims with respect to such creditors will be one year – instead of four months.

After the expiration of the statutory time period for the filing or presentation of creditor claims, a Minnesota Personal Representative will have certain duties with respect to any claims which were filed or presented in a timely manner.

In particular, a Minnesota Personal Representative may have a duty to take action to disallow certain claims which are not determined to be legitimate.

Taking no action with respect to a claim will be an acknowledgment by the Minnesota Personal Representative of its validity.

Minnesota Probate AdministrationInsolvent Estates

To the extent that an estate will not be able to pay in full all of the legitimate claims which were filed or presented in a timely manner, a Minnesota Personal Representative should not pay any such claims without a court order addressing how much each of the creditors are entitled to receive.

The payment of legitimate duly filed claims is subject to a priority ranking system:

  • with higher priority debts being entitled to receive payment in full,
  • before lower priority debts are entitled to be paid.

The process of handling creditor claims is subject to statutory requirements, and is best left to an experienced probate attorney.

Minnesota Probate AdministrationIncome Tax Issues

A Minnesota Personal Representative will have the responsibility to file any income tax returns on behalf of the decedent with both the IRS, and the Minnesota Department of Revenue.

Such returns include the IRS Form 1040, and the Minnesota Form M-1, with respect to income tax years ending on the date of the decedent’s death.

However, the status of income tax returns which were filed by the decedent prior to death is also of concern to a Minnesota Personal Representative – by reason of the potential for unpaid income tax liabilities.

A Minnesota Personal Representative will also be responsible for filing the estate’s IRS Form 1041, and Minnesota Form M-2, income tax returns, with respect to income tax years commencing on the date of the decedent’s death, and continuing thereafter.

General Statute of Limitations: IRS Form 1040 – IRC Section 6501

IRC § 6501(a) addresses the limitations imposed on the IRS with respect to the assessment and collection of any tax other than the estate tax, by providing in part as follows:

Except as otherwise provided in this section,

the amount of any tax imposed by this title (Internal Revenue Title)

shall be assessed within 3 years after the return was filed

(whether or not such return was filed on or after the date prescribed).

Therefore, the IRS generally has three years from the date of filing of a return in which to audit the return, and assess any deficiencies it deems appropriate.

Such assessments will be made against the decedent’s estate after death, even with respect to income tax years commencing prior to the decedent’s death.

Extent of Personal Liability of the Personal Representative

A Minnesota Personal Representative of a decedent’s estate may be personally liable for any debts the decedent owed to either the United States, or to the State of Minnesota, if the Minnesota Personal Representative:

  • had knowledge of the debt owed to the government, or
  • knew facts that would lead to further inquiry about such debts,

and distributed estate assets to the estate’s beneficiaries without discharging the debts, leaving the estate insolvent and unable to pay the decedent’s income tax liabilities.

Duty of Inquiry – Unpaid Income Taxes

Under federal law, a Minnesota Personal Representative has a duty of inquiry to determine whether:

  • all necessary income tax returns have been filed,
  • all income has been reported, and
  • all taxes due have been paid.

Knowledge Required – Unpaid Income Taxes

Under federal law, a Personal Representative’s liability for unpaid taxes depends on whether the representative had:

  • knowledge of the existence of a claim for back taxes, or
  • knowledge of facts that would put him or her on inquiry with respect to any such back taxes.

A Personal Representative clearly has knowledge of the facts regarding unpaid taxes the IRS may determine after auditing any income tax returns which were signed by the Personal Representative.

However, with respect to any income tax returns filed by the decedent before his or her death, the Personal Representative may have a duty to make inquiry as to whether all income taxes have been paid – as finally determined by the IRS.

Burden of Proof – Unpaid Income Taxes

Under federal law, the burden of proving a Personal Representative’s lack of knowledge with respect to any unpaid taxes of the decedent is generally on the Personal Representative.

Payment of Claims Having Priority Over Federal Taxes

Under federal law, a Personal Representative is allowed to pay any debts or claims against the estate that have priority over the debts due to the United States – such as expenses of administration, funeral expenses, and family allowances.

Therefore, a Personal Representative will be protected from any claims by the IRS with respect to any payments by the Personal Representative for:

  • court costs and attorney fees required to administer the estate,
  • funeral expenses, and
  • family allowances allowed by the court.

However, last-illness expenses are subordinate to federal tax debts, as are claims having a lower priority for payment.

Minnesota Probate Administration Discharge of the Personal Representative

Any discharge of a Minnesota Personal Representative by the probate court after final distribution of estate assets will not eliminate the liability of the Minnesota Personal Representative for unpaid federal taxes of the decedent.

However, there are certain income tax documents which can be filed with both the Internal Revenue Service, and the Minnesota Department of Revenue, which may shorten the time periods during which the tax authorities can assess any income tax liability against the Minnesota Personal Representative.

Minnesota Probate Administration Closing the Estate

Unless the administration of an estate is being supervised by the court, the Minnesota Personal Representative will not need court approval in order to close the estate, unless one of the beneficiaries, or in some cases – the Minnesota Attorney General – objects to the manner in which the estate has been administered.

There are two ways to close an estate:

  • without court approval; or
  • with court approval.

Closing the estate with court approval would provide better protection to the Minnesota Personal Representative than would closing the estate without court approval.

(i)      Closing Without Court Approval – Unsupervised Personal Representative’s Statement to Close Estate

The procedure to close an estate without court approval – which is not available if the estate is being supervised by the court – involves filing with the court, and providing to all of the interested parties, a closing statement indicating that the Minnesota Personal Representative:

  • has completed all of his or her fiduciary duties as Minnesota Personal Representative, and properly administered the estate, and
  • has previously provided to each of the interested parties copies of the Inventory and the Final Account – which identify how the estate was administered.

The filing of such a closing statement will begin the running of a one-year limitations period with respect to any claims being brought against the Minnesota Personal Representative for the manner in which the estate was administered.

However, the Personal Representative’s authority to act as the Minnesota Personal Representative will continue for one year after the filing of the closing statement.

(ii)    Closing with court approval

Closing of the estate with court approval can be accomplished either:

  • with a hearing before a judge or probate referee, or
  • in some cases, without a hearing.

Minnesota Probate Administration Closing the Estate With a Hearing

If there was going to be a hearing before a judge or probate referee on the Final Account, the Minnesota Personal Representative would:

  • submit the proposed Final Account to the court, and provide a copy thereof to all interested persons,
  • petition the court for approval of the Final Account, and
  • allow the Will Beneficiaries to file with the court any objections they may have with respect to the proposed Final Account, or the manner in which the Minnesota Personal Representative has administered the estate.

If no objections are filed, or if the court otherwise approves of the manner in which the estate has been administered, it will approve the Final Account.

Minnesota Probate Administration Closing the Estate Without a Hearing

There are two procedures available to obtain court approval for the closing of the estate without a hearing:

(i)    Written Consent

The first procedure involves obtaining the written consent of all of the named Will beneficiaries – including those not entitled to receive any distributions from the estate for some reason – to the manner in which the Minnesota Personal Representative has administered the estate.

(ii)    Proposal for Distribution

The second procedure involves preparing a Proposal for Distribution which identifies the manner in which the Minnesota Personal Representative intends to distribute the estate 30 days after providing written notice of the Proposal for Distribution to all of the named Will beneficiaries – including those not entitled to receive any distributions.

If no objection is received by the Minnesota Personal Representative within 30 days after service of the Proposal for Distribution, distribution of the estate assets can be made as identified in the Proposal for Distribution.

Minnesota Probate Administration Discharge of the Personal Representative

After the Final Account has been approved by the Probate Court, the Minnesota Personal Representative may petition the court for a formal discharge from the duties of the Minnesota Personal Representative.

Conclusion – Minnesota Probate Administration

If you need assistance with a Minnesota Probate Administration, contact attorney Gary C. Dahle, at 763-780-8390, or gary@dahlelaw.com.

Copyright 2017 – All Rights Reserved

Gary C. Dahle – Attorney at Law

2704 County Road 10, Mounds View, MN 55112

Phone:  763-780-8390    Fax: 763-780-1735

gary@dahlelaw.com

Legal Disclaimer

Information provided herein is only for general informational and educational purposes.

Minnesota probate law involves many complex legal issues.

If you have a specific legal problem about which you are seeking advice, either consult with your own attorney or retain an attorney of your choice.

Gary C. Dahle, Attorney at Law, is licensed to practice law in the State of Minnesota, in the United States of America.

Therefore, only those persons interested in matters governed by the laws of the State of Minnesota should consult with, or provide information to, Gary C. Dahle, Attorney at Law, or take note of information provided herein.

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Nothing herein will be deemed to be the practice of law or the provision of legal advice. Clients are accepted by Gary C. Dahle, Attorney at Law, only after preliminary personal communications with him, and subject to mutual agreement on terms of representation.

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