Probate Potholes

And How to Avoid Them

The probate statutes are tucked under the hood of Titles 30-32 and, for the most part, are simple and short. A lawyer inexperienced in probate because of just beginning practice or being asked to help a friend or associate can quickly grasp the wheel of the code and adequately navigate his or her client through the administration of a simple estate. However, while the typical probate road is normally smooth travelling, the administration of an estate can be complex and along this road are some sneaky potholes that jar even the most experienced lawyers.


So let’s pave your way with the five most frequent ones we see in Probate Court in Davidson County and how to avoid them:

Throwing Off Your Alignment:
Real Property

The most common pothole on the probate highway we encounter is a misunderstanding of who owns the decedent’s real property1 upon death. While Tenn. Code Ann. § 31-2-103 vests the personal property of a decedent with the personal representative (sometimes I’ll abbreviate as “PR” for efficiency) of the estate for the PR to utilize and distribute, it directly vests the real property in the heirs of an intestate estate (no Last Will and Testament) or the beneficiaries of the decedent’s will in a testate estate.2 In other words, the real property is not owned by the estate and the PR has limited authority over that real property. There are two major exceptions in the statute and some optional duties to the real property given to the PR by another statute, all of which will be discussed later, but this initial distinction is crucial and often mistaken.

One frequent mistake we see from this distinction is a motion filed by the personal representative in his/her fiduciary capacity to approve a purchase and sale agreement for the real property not in the probate estate,3 and the contract is either in the name of the estate and signed by the PR, or just in the name of the PR as a fiduciary. However, the PR does not have standing to appear before the probate court on real property vested in the heirs/beneficiaries and this contract could be a nullity4 as “you cannot convey what you do not own.”5

Not only could this jolt a PR trying to sell the decedent’s real property, it can have a retroactive negative effect as well, like running over a pothole on the way home without incident but waking up the next morning to a flat tire. Our court heard a petition to reopen an estate6 which, fortunately, was joined by all potential interested parties. It stated that five years prior, after the estate had been initially opened, the four children and only heirs of the decedent decided to quitclaim the real property to a grandchild of the decedent but reserve a life estate to themselves. However, the quitclaim deed was signed by the PR of the estate as “legal administrator” granting, selling, and conveying “all the rights, title, interest, claim, or demand that the Estate … may have,”7 but the real property was vested in the heirs, not the probate estate. Five years later, the heirs desired to sell it but the title company questioned the legal status of the property. Since all were on board, it was not a difficult proceeding, but the case was a wake-up call as to a sudden crack in the chain of title if those preparing the deed did not understand the ownership of the real property as dictated by the vesting statute.

The personal representative, however, is given some statutory, optional responsibilities to the real property even when it is vested in the heirs/beneficiaries. Tenn. Code Ann. § 30-2-323 is a one paragraph statute that allows the PR, in his or her discretion, “to advance or to pay as an expense of administration the reasonable costs of routine upkeep of any real property” including “utility services, day-to-day maintenance, lawn care, and insurance premiums,”8 but the statute limits that upkeep to only four months after decedent’s death.9 However, this statute specifically prohibits the PR from paying the mortgage, real estate taxes, major repairs, or extraordinary expenses of the real property at any time,10 which makes sense since the estate does not own the property. It is the vested owners and not the PR that have three choices if a mortgage is involved: pay the mortgage and keep the property, sell the property and keep the net proceeds, or let it go to foreclosure.11 Tenn. Code Ann. § 30-2-323 does clarify though that these limitations can be overridden by the terms in the will12 (for example, the will can direct the PR to pay any outstanding mortgage with estate funds), and they only apply when the real property is not part of the probate estate (the vesting exceptions discussed below bring the real property into the probate estate).13

This lesson was learned by the former PR in In re Estate of Schorn,14 in which the Court of Appeals affirmed the trial court’s equitable award of $6,500 instead of the PR’s request of $19,958.48 for his work on the house. The court ruled he proceeded at his own risk since he had no authority as PR over the real estate.15

Beware, however, of other unexpected detours in this vesting route: In the case In re Estate of Idell,16 the sole beneficiary was a minor son. The real property was vested immediately in the son upon death of his mother, and later the real property was foreclosed upon. In litigation brought by the now adult son, the PR argued the real property was not in the estate and therefore he had no duty regarding it. However, the Court of Appeals affirmed the trial court, invoking the doctrine of “Guardian de facto or de son Tort” where “One may be treated as a constructive guardian, or guardian de son tort, and may be compelled to account for the property as if he were a guardian in fact where, being guardian by nature, he takes the possession and administration of his ward’s property.17 Based on specific facts that were extensive, the court awarded damages against the PR for failure to perform the duties required of him even though the property was not in the estate.

Other obstacles encountered have been mistakes in determining the ownership of the real property in the first place. For example, the court ruled in In re Estate of McCants18 that while the decedent owned the corporation as a sole shareholder and the corporation owned real property, the decedent’s actual ownership was a personal property interest in the stocks of the corporation, so the real property did not vest in the heirs of the decedent.19 In In re Estate of Culp,20 the real property was left to a trust for the benefit of certain persons until they reached age 30, which they had reached when the decedent died. The court ruled the beneficiary of the estate was the trustee for the trust, not the beneficiaries of the trust, even though the purpose of the trust (they reached the ending age) was no longer needed. The real property therefore vested in the trustee, not the trust beneficiaries, and not the estate.21

Vesting Exception #1

The vesting statute of Tenn. Code Ann. § 31-2-103 has two major exceptions. The first exception allows the testator in estate planning to affirmatively direct real property be part of the probate estate and not immediately vested in the beneficiaries: “The real property of a testate decedent vests immediately upon death in the beneficiaries named in the will, unless the will contains a specific provision directing the real property to be administered as part of the estate subject to the control of the personal representative.”22 If the probated will has this provision, the real property does not vest in the beneficiaries of the will but instead is part of the probate estate under the control of the personal representative.

This exception could be a smooth highway for the estate attorney if all wills were the same and had language mimicking the statute, such as: “I give to my personal representative all real property which I may own at the time of my death and direct my personal representative to hold, administer, and distribute my real property as part of my probate estate.”23 However, most wills are not this nicely direct and for these estates this exception is a gravel road with only portions paved by the Court of Appeals. For instance, in the case In re Estate of Schubert,24 the Court of Appeals stated that the will’s language directing the real property “be given” to a specific beneficiary when he used “give, devise and bequeath” earlier for other property to reflect the decedent’s intent that the real property not vest directly to the beneficiary since the only way it can be “given” is if someone has it to give.25
Another example is In re Estate of Mettetal,26 in which the testator specifically left his real property in Washington County to a son. The will later stated, “[A]ny real property which I own at my death is to be a part of my probate estate and treated as forming part of my personal estate for administrative purposes.” Seems like the magic language to bring the real property into the estate, right? Wrong. The Court of Appeals determined, based on the will as a whole, that the decedent intended the specific devise of the Washington County property to vest immediately to his son, but his real property in other counties was to be brought into the probate estate.27
So how do you avoid these sneaky scenarios that could wreck your case? The above two cases were will construction cases in which the court had to determine the intent of the decedent by looking at the whole text of the will, so if you have ANY doubt on whether the language of the will brings the real property into the probate estate, file and serve a Petition to Construe the Will and let the court give directions on the route of your estate administration at the beginning of your case instead of later being forced to reverse course and undo what was done.

Vesting Exception #2

The second exception in the vesting statute allows the personal representative to grab the real property away from the vested owners and pull it into the estate to sell to pay debts of the estate when there is not enough personal property to do so. The statute refers to Tenn. Code Ann. § 30-2-401 et seq., which contains provisions where the PR, or a creditor,28 may file a Petition to Sell Land to Pay Debts, asking the court to bring the real property into the probate estate for the PR to sell due to the lack of assets to pay debts and expenses. If the court grants the petition, the vested heirs/beneficiaries no longer control the property, and the PR has authority to sell and maintain the property fully without the limitations of Tenn. Code Ann. § 30-2-323 discussed earlier.

While this exception seems simple enough, note the term “decedent’s obligations” in the vesting statute exception may not be as obvious as “debts and expenses” found in the Sale of Land to Pay Debts provisions. Consider the case of In re Estate of Nichols,29 where the decedent’s will left each daughter an annuity to be purchased by the estate, and the remainder of his property, including real property, to a trust. The estate did not have enough money to fund the annuities. The Court of Appeals affirmed the trial court, ruling the PR had to sell the real property to fund the annuities. Relying on established law,30 the court ruled the annuities were a charge against the real property of the estate because “a general pecuniary legacy followed by a gift of a combined residuary estate acts as a charge on both the personal property and real property.”31

Forcing a Quick Swerve:
Paying Debts vs. Insolvency

Another frequent source of confusion that can detour an attorney is the difference between the aforementioned petition to sell property to pay debts and notice of insolvency. We often see a Petition to Declare the Estate Insolvent and Sell Real Property filed, but before the property is sold an insolvency declaration is usually premature. The statutory provisions for selling land to pay debts are separate and distinctive from the insolvency provisions.

As discussed earlier, Tenn. Code Ann. § 30-2-401 et seq. allows the personal representative or a creditor to file a petition (NOT a motion, a frequent mistake) to sell land to pay debts. The petition can be filed at any time,32 but doesn’t affect the creditors’ time period for filing claims.33 All interested parties (those with any interest in the property such as lienholders, vested owners, tenants, etc.) must be impleaded, but creditors of the estate do not need to be.34 No notice of insolvency needs to be made.35 This makes sense because at this stage, it is assumed that after the sale of the property all debts and expenses will be paid, so the creditors at this point are not threatened to lose money if the petition is granted. It is possible that after the net proceeds are realized from the sale the estate won’t be insolvent.

Tenn. Code Ann. § 30-5-101 et seq., however, defines the insolvency procedure, which is strikingly different from the provision in the previous paragraph. A notice of insolvency cannot be filed before time period for filing claims has ended.36 It is termed a notice of insolvency because a petition is NOT required; all that is required is a notice filed with the clerk stating the estate is insolvent. This notice, however, must include an accounting of assets37 that came into the hands of the personal representative and a plan of distribution of those assets by priority.38 Since it is possible they won’t be paid in full, creditors are allowed due process and notice must be sent by certified mail, return receipt requested, to each creditor that filed a claim against the estate.39 The notice has to include language stating that “Objections to this proposed plan of distribution must be filed with the clerk within thirty (30) days from the date of receipt of this notice.”40 If no objections are filed within those 30 days, the personal representative may distribute according to the plan of distribution and close the estate.
Simply wait until you sell the real property before filing a notice of insolvency if still needed.

Causing a Wreck:
Bill Morris and Its Statutory Fix

In the August 2015 issue of this Journal, Eddy R. Smith wrote a piece titled “Strictly Speaking, When Is a Will Not a Will?”41 about the effects of the Tennessee Supreme Court case In re Estate of Chastain42 and the Court of Appeals case In re Estate of Morris.43 Josh A. McCreary followed up with a subsequent article in the September 2016 issue of this Journal titled “Execution of Last Will & Testaments: Revisted,”44 which discussed the then-recent amendment45 the General Assembly passed to “fix” the Morris ramifications. I encourage you to read their articles as well as follow-up cases,46 and I won’t try to rehash their thorough and excellent work. Generally speaking, Chastain ruled that the affidavit to prove a will is a different statutory provision and different legal document than the will itself,47 and based on that holding Morris invalidated a will where the witnesses only signed the affidavit to prove the will.48 The statutory fix allows a procedure to validate those types of now invalid wills which were commonly done by filing under certain circumstances another affidavit to prove the will. This statutory fix, however, does not apply to a testator’s signature or for wills executed on or after July 1, 2016.49

Three years later, however, almost every week in our court, an attorney presents a will for probate where the witnesses only signed the affidavit or a combined attestation clause and affidavit. Unfortunately, the attorney’s journey to probate is halted until an additional affidavit to prove the will is submitted pursuant to the statutory fix. If you are using older templates or wills as a guide when you design your own wills, watch out! Make sure the witnesses and testator sign the actual will, and the witnesses sign a separate affidavit to prove the will.

So what do you do if the witnesses of your will only signed the affidavit, and your will was executed on or after July 1, 2016, which prevents the statutory fix from being utilized? We have heard attorneys in court attempt to distinguish these wills from the one in Morris, and some have brought the witnesses and the notary to court to support their arguments. Whatever you argue, however, avoid this pothole by asking for and preparing for alternative relief to open an intestate estate or probate a prior will, and prep your clients as to the possibility the will might be ruled invalid based on new law and caselaw.

Popping a Tire:
Statute of Limitations for a Claim

Another bump in the road estate attorneys sometimes fail to navigate correctly involves the statute of limitations on a creditor’s claim against the estate.50 A creditor has a year from the death of the decedent to file a claim against the estate, unless it received actual notice from the personal representative, which the PR has a duty to send to all known or reasonable ascertainable creditors.51 If the creditor received actual notice from the PR, its timeline to file a claim is shortened to four months52 after the first publication of notice to creditors in a newspaper in the county of probate, which the clerk of the court has a duty to publish.53

Actual notice to the creditor is different from the published notice to creditors. Frequently, we see exceptions to claims that state the first publication of notice to creditors was, say, July 1, 2018, the four month period ended on Nov. 1, 2018, and the claim was filed Dec. 1, 2018. Therefore, the exceptor argues, the claim is time-barred. But what about the actual notice sent to the specific creditor? If actual notice was not sent directly to the potential creditor and received, then that creditor has a full year after death of the decedent to file its claim, regardless of any notice to creditors in the paper. The published notice to creditors is merely the green light; the actual notice received by specific creditors is pushing the gas pedal to propel the four-month limitations period through the intersection to be relied upon as an exception argument.

However, pressing the gas pedal won’t do a thing if there is no gas in the car: the actual notice sent to a creditor must be very specific in its wording, otherwise it will not qualify as notice. In the Tennessee Supreme Court case Estate of Jenkins v. Guyton,54 the debtor and creditor reached an agreed order of judgment against the debtor of  $141,781, with a stay of execution if the debtor paid $25,000 initially and then $2,500 monthly thereafter. When the debtor later died, his estate sent the creditor a letter informing him of the death, along with the required monthly payment, and continued thereafter to make payments. After the then six-month (four months now) from first publication claim period ended, however, the estate stopped making payments since the creditor failed to file a claim. He immediately filed one, and the estate filed an exception arguing it was time-barred. The Supreme Court, in this first impression case, determined the actual notice required to be sent directly to a creditor was not notice of the death and opening of an estate, but “must, at a minimum, include information regarding the commencement of the probate proceedings and the time period within which claims must be filed with the probate court.”55 The Supreme Court affirmed the lower courts in allowing the claim since it was filed within one year of death.56

Don’t blow your potential exception: make sure to send each creditor a letter and copy of the published notice57 and file with your exception a copy of what you sent and when it was sent. Some attorneys send this by certified mail to confirm receipt.

Sending You on a Detour:
New Laws

Probate statutes over the last several years have been tweaked or outright changed by the General Assembly, and most of the time these changes are effective as soon as the governor signs the bill. As a result, the templates attorneys have always used in their practice may be suddenly incorrect. It is never good to have a judge remind you in front of your client that your filing is wrong because of a change in law, especially when that change was a few years ago.
The most recent change that has regularly surprised unsuspecting attorneys was a new requirement signed into law on May 10, 2019, for petitions for letters testamentary or of administration to include the name, relationship, address and age of the proposed PR and a statement of any misdemeanors and felonies by that person and a statement on any sentence of imprisonment to the penitentiary. Petitions filed on May 9 without the requirement were fine, but those filed on May 13 (the next Monday) were not compliant with the law and letters could not be issued until the petition was amended.

To avoid these surprises, check the excellent website of the General Assembly, which has the text of introduced bills and amendments, and tracks the progress of the bills through the legislature. Go to http://www.capitol.tn.gov.58 I would suggest clicking in the top navigation bar “LEGISLATION” and then “BROWSE BILLS BY SUBJECT.” Choose a subject (Note: “Estates” and “Probate” are separate subjects and are distinctive; conservatorships are under the subject “Guardianships”) and then bookmark the resulting page or save it to your toolbar. I regularly check my bookmarked pages and know well in advance before a bill goes to the governor’s desk. For example, I am tracking a bill pending in the GeneralAssembly now: House Bill 236/Senate Bill 399, which were deferred to 2020, will significantly increase homestead exemption if either is passed in current form.59
May your ride down the probate highway be smooth and incident free! 

SCOTT PILKINTON is the staff attorney and special master for Judge Randy Kennedy of the Seventh Circuit Court, which has exclusive probate jurisdiction in Nashville. He has heard more than 3,000 probate petitions while presiding over the Probate Rocket Docket and has briefed Judge Kennedy on thousands more probate hearings. He graduated from Vanderbilt and worked in sports and business before graduating as the Founders’ Award winner from Nashville School of Law in 2011.

Notes
1. For simplicity, this article assumes the decedent owned at least a portion of real property in fee simple without tenancy by the entirety (which is never part of the estate) or joint tenancy (which has right of survivorship, but that right can be destroyed. See Bryant v. Bryant, 522 S.W.3d 392, 413–14 (Tenn. 2017). Note: there are bills pending before the General Assembly (HB546/SB554) addressing the Bryant decision.
2. From now on, I will just say heirs/
beneficiaries, as heirs are only distributees of an intestate estate and beneficiaries can be distributees of either a testate estate or intestate estate.
3. Local Rule 39.07(a)(4) in the 20th Judicial District requires contracts to sell decedent’s real property be approved by the court.
4. Lebovitz v. Porter, 252 S.W.2d 144, 145 (1952).
5. Cantrell v. Cantrell, No. M2002-02883-COA-R3CV, 2004 WL 3044907, at *8 (Tenn. Ct. App. Dec. 30, 2004).
6. Petition of Mary Kelsoe to Reopen Estate and for Declaratory Judgment, In re Estate of Mary Magdalene Kelsoe, Case No. 11P1034 (7th Cir. Ct. of 20th Jud. Dist. Tenn. June 23, 2016).
7. Id. Attachment A to the petition.
8. Tenn. Code Ann. § 30-2-323.
9. Id.
10. Id.
11. In re Estate of Vincent, 98 S.W.3d 146, 150–51 (Tenn. 2003).
12. Tenn. Code Ann. § 30-2-323 (the statute begins with “ Unless contrary to the decedent’s will …”).
13. Tenn. Code Ann. § 30-2-323 (the statute ends with “None of the foregoing limitations shall apply to any real property that is actually part of the probate estate being administered.”) See In Re Estate of McCants, No. E2017-02327-COA-R3-CV, 2018 WL 3217697 (Tenn. Ct. App. July 2, 2018), for an interesting in-the-
estate/out-of-the-estate accounting case.
14. In re Estate of Schorn, No. E2013-02245-COA-R3-CV, 2015 WL 1778292 (Tenn. Ct. App. Apr. 17, 2015).
15. Id. at *7.
16. In re Estate of Idell, No. 03A01-9309-PB-00319, 1994 WL 49061 (Tenn. Ct. App. Feb. 18, 1994).
17. Id. at *3 (quoting Am.Jur.2d Guardian and Ward § 3 (1968)).
18. In re Estate of McCants, No. E2017-02327-COA-R3-CV, 2018 WL 3217697 (Tenn. Ct. App July 2, 2018).
19. Id. at 5-6.
20. In re Estate of Culp, No. M2015-01421-COA-R3-CV, 2016 WL 2899122 (Tenn. Ct. App May 12, 2016).
21. Id. at *3.
22. Tenn. Code Ann. § 31-2-103 (emphasis added).
23. Example sampled from the Last Will and Testament of Hilda Taylor Laurence, admitted to probate in In re Estate of Hilda Taylor Laurence, Case No. 17P1664 (7th Cir. Ct. of 20th Jud. Dist. Tenn. Oct. 5, 2017).
24. In re Estate of Schubert, No. E2014-01754-COA-R3-CV, 2015 WL 4272192 (Tenn. Ct. App. July 15, 2015).
25. Id. at *5.
26. In re Estate of Mettetal, No. E2017-01258-COA-R3-CV, 2018 WL 4772072 (Tenn. Ct. App. Oct. 2, 2018).
27. Id. at *4. See also In Re Estate of Owen, No. W2009-01531-COA-R3-CV, 2010 WL 1172078 (Tenn. Ct. App. March 29, 2010); In re Estate Of Pickard, No. M2008-02028-COA-R3-CV, 2009 WL 26327620 (Tenn. Ct. App. Aug. 26, 2009).
28. Tenn. Code Ann. § 30-2-401(a).
29. In re Estate of Nichols, No. E2017-00600-COA-R3-CV, 2018 WL 1443017 (Tenn. Ct. App. Mar. 22, 2018).
30. The court quoted Hutchinson v. Gilbert, 7 S.W 126, 128 (Tenn. 1888), Moore v. Moore, 315 S.W.2d 526, 530 (Tenn. 1958), and Rick v. Middle Tenn. Med. Ctr. Inc., No. M2000-01662- COA-R3-CV, 2003 WL 1797952, at *4-5 (Tenn. Ct. App. April 7, 2003).
31. Nichols, 2018 WL 1443017, at *4.
32. Tenn. Code Ann. § 30-2-402(a).
33. Id. at (b)(3).
34. Id. at (b)(1). Implead: “To bring (someone) into a lawsuit; esp., to bring (a new party) into the action.” Black’s Law Dictionary (11th ed. 2019).
35. Tenn. Code Ann. § 30-2-402(b)(2).
36. Tenn. Code Ann. § 30-5-102.
37. Tenn. Code Ann. § 30-5-103(a). This is required even if accountings were waived by court order initially since waivers can only be for solvent estates. See Tenn. Code Ann. § 30-2-301(a) (inventory); TTenn. Code Ann. § 30- 2-601(a)(4)(accountings).
38. Tenn. Code Ann. § 30-5-103(a).
39. Tenn. Code Ann. § 30-5-102.
40. Tenn. Code Ann. § 30-5-103.
41. Eddy R. Smith, “Strictly Speaking, When Is a Will Not a Will?” Tennessee Bar Journal, Vol. 51, August 2015.
42. In re Estate of Chastain, 401 S.W.3d 612 (Tenn. 2012).
43. In re Estate of Morris, No. M2014-00874-COA-R3-CV, 2015 WL 557970 (Tenn. Ct. App. Feb. 9, 2015).
44. Josh A. McCreary, “Execution of Last Will & Testaments: Revisted”, 52-SEP TENN. B.J. 26, Sept. 2016.
45. Tenn. Code Ann. § 32-1-104(b).
46. See In re Estate of Morris, No. M2016-02557-COA-R3-CV, 2017 WL 5304464 (Tenn. Ct. App. Nov. 13, 2017), appeal denied (Mar. 15, 2018)(second appeal of the original Morris case); In re Estate of Stewart, 545 S.W.3d 458 (Tenn. Ct. App. 2017), appeal denied (Feb. 14, 2018); Parker v. Parker, No. M2016-00528-COA-R3-CV, 2017 WL 384428 (Tenn. Ct. App. Jan. 26, 2017); In re Estate of Fant, No. W2016-02498-COA-R3-CV, 2017 WL 3492007 (Tenn. Ct. App. Aug. 15, 2017), appeal denied (Jan. 23, 2018).
47. Chastain, 401 S.W.3d at 620.
48. Morris, 2015 WL 557970 at *4.
49. Tenn. Code Ann. § 32-1-104(b).
5.0 Tenn. Code Ann. § 30-2-306(b)(2).
51. Id. at (d).
52. Id. at (b)(1)(A). If the actual notice was received within the last sixty days of the four month period, the creditor is allowed sixty days from receipt regardless of the end of the four-month period. Id. at (b)(1)(B).
53. Tenn. Code Ann. § 30-2-306(a).
54. Estate of Jenkins v. Guyton, 912 S.W.2d 134 (Tenn. 1995).
55. Id. at 138.
56. Id.
57. See In re Estate of Burns, No. W1999-01888-COA-R3-CV, 2001 WL 687055 (Tenn. Ct. App. June 18, 2001)(Remanded to trial court to determine when actual notice was received since it was not in the record).
58. Tennessee General Assembly, http://www.capitol.tn.gov (last visited Sept. 9, 2019).
59. H.B. 236 & S.B. 399, The 111th General Assembly (House version available at http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=HB0236)(Senate version available at http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=SB0399&...)(both pages last visited Sept. 9, 2019).

          | TBA Law Blog