Dependent Administration

Dependent Administration

The default provision under Texas law requires the appointment of a dependent administrator or executor.

Court approval.....

The dependent administrator is required to seek the Court’s approval for most of the transactions that the administrator may need to enter as part of the probate process. For instance, each of the following require the Court’s special approval:

1. Sale of real estate
2. Sale of cars
3. Sale of personal property
4. Payment of debts
5. Payment of expenses during the administration
6. Payment of professional fees related to the estate (i.e. attorneys, accountants, etc.)

Generally, the process for obtaining the Court’s approval for any of these transactions requires the administrator to submit a written application for authority to pay the expenses and attach copies of the outstanding invoices or other information supporting the request.

Creditor Issues....

The dependent administration presents particular challenges for creditors seeking payment from the estate for debts owed by the Decedent at the time of death. Unlike the independent administration where the creditors have unlimited options for obtaining payment, the Probate Code has laid out very specific procedures that the creditors must follow in a dependent administration. For instance, they must submit their Claim for payment in a very specific form, including certain required information. Additionally, they only have a certain time-frame within which they can be paid, and they must take certain steps to ensure that they secure their Claim. If a creditor fails to follow the requirements specifically, then the estate will no longer be liable to pay the debt.

The strict requirements related to creditors provide assurance to the estate that it only pays those debts that are properly proved to the Court. Conversely, the requirements provide a mine-field for creditors attempting to secure their Claims.

The Bond Requirement....

Any dependent administrator is required to post a bond. The bond is essentially an insurance policy taken out with a bonding company. The administrator is asking the bonding company to ensure his or her proper performance of duties as administrator. If the administrator violates his duties and, for instance steals part of the assets of the estate, the bond company will reimburse the estate to make it whole for the administrator’s misdeeds.

The amount of the bond will be set by the Court, and the estate will be required to pay an annual bond premium. This bond premium is much like a homeowners’ insurance policy premium. For instance, your home may be insured for $100,000.00, but the premium each year might only be $800.00. Likewise, the Court might set a bond in the amount of $50,000.00, which would have a much lower premium amount of a few hundred dollars.

6-month Requirement....

In general, a dependent administration must remain open for at least six months. Because of timelines related to notice to potential credits, the Courts will require that the administration stay open for this length of time to ensure that all creditors have the proper time to be able to present their claims. Likewise, the 6 month period practically presents the quickest length of time that a dependent administration can be concluded because of the accounting requirements and the length of time involved in having to request court approvals for each transaction.

The 6 month requirement does not apply in independent administrations, and it therefore ends up being another reason why the dependent administration is going to be a lengthier process than the independent administration.

Accounting Requirements....

The Texas Probate Code lays out very specific requirements that a dependent administrator account for their actions as the administrator.

Under the Code, the Administrator must file a sworn accounting at the end of each year of the probate administration and also at the conclusion of the probate administration. In the accounting, the Administrator must provide detail related to the income of the estate received by the administrator during the year and also the expenses paid by the estate during the year. Likewise, the administrator must provide a listing of the assets that remain on hand in the estate at the end of the administration and a listing of all creditor claims that have been filed against the Estate during the year.

The annual accounting serves two functions. First, it informs the Court of the activity of the administrator during the probate process. Second, it provides the heirs and beneficiaries of the Estate with a full and complete accounting of the transactions that have affected the Estate. This disclosure to the heirs and beneficiaries allows them the opportunity to monitor what is happening in the Estate.

At the conclusion of the dependent administration, the Administrator must file a Final accounting that details the transactions since the last accounting. Likewise, in that final account, the Administrator provides a listing of the heirs and beneficiaries and the portion of the Estate that each is entitled to receive. The Final accounting will be provided to each of those beneficiaries and heirs, who will then have the opportunity to object to it if they perceive any defects or problems. Once the Final accounting has been approved, the dependent administrator will distribute the remaining assets according to the Court’s instruction, and the administration will thereafter be relieved of any further responsibility as the administrator.