Indiana — Using Sale Proceeds to Pay Estate Cleanout and Junk Removal Expenses

Why sale proceeds are treated as estate funds

When estate property (real or personal) is sold during probate, the money from that sale becomes part of the estate. That money exists to pay costs of administration, funeral and last illness expenses, creditor claims, taxes, and then to be distributed to heirs or beneficiaries according to the will or Indiana law. Indiana law governing probate and the duties of a personal representative is found in Indiana Code Title 29 (Probate). See Indiana Code, Title 29 (Probate): https://iga.in.gov/legislative/laws/2024/ic/titles/029/.

What kinds of expenses are normally allowed

• Reasonable costs of preserving and preparing estate property for sale (cleaning, junk removal, minor repairs).
• Costs of securing, storing, or insuring personal property while the estate is administered.
• Costs of removing hazardous materials or addressing health and safety issues that prevent sale or transfer.
• Costs to prepare a residence for sale (e.g., hauling away bulky trash, professional cleanup) when those costs increase net value or are necessary for sale.

When you should get court approval

Not every routine expense requires a hearing, but you should consider court approval or at least provide notice to beneficiaries in these situations:

• Large expenses relative to the estate’s size (for example, expensive full‑house cleanouts in a small estate).
• When beneficiaries or co‑owners dispute the need for the expense or want to keep specific items.
• If the estate appears insolvent and the allocation of limited proceeds among creditors, administrative expenses, and beneficiaries is unclear.
• If you plan to use sale proceeds to pay yourself more than a routine authorized fee or to reimburse expenses that could be disputed.

If in doubt, file a petition with the probate court for guidance or authorization. The probate court has the power to approve or disallow charges against the estate under Indiana probate law (see Indiana Code Title 29).

Priority of payment

Indiana law establishes the general priority for paying estate obligations. Reasonable expenses of administration are usually paid before distributions to beneficiaries. Creditor claims that are allowed must be paid according to statutory priority. Always keep in mind that the estate’s obligations must be satisfied before final distribution.

Practical steps to follow

1. Confirm your authority. Be the appointed personal representative or otherwise authorized by the probate court or by a valid designation (power of attorney typically ends at death).
2. Take an inventory. List estate assets and identify items that need removal, cleaning, or disposal.
3. Get multiple estimates. For larger cleanouts or disposal jobs, obtain several bids so you can show the court and beneficiaries that the expense was reasonable.
4. Document everything. Keep contracts, invoices, receipts, photos, and notes showing condition and necessity of work.
5. Use the estate bank account. Deposit sale proceeds into an estate account and pay expenses from that account. Do not commingle estate funds with personal funds.
6. Account to beneficiaries and the court. Prepare an accounting showing sales, expenses, and distributions so interested parties can review.
7. Seek court approval when needed. File a petition if beneficiaries object or if the charge is large, unusual, or could reduce amounts due to creditors.

Common problem scenarios and how to handle them

Scenario 1 — Small cleanup for sale: If a vacant house needs junk removal to be marketable, you can typically hire a trash removal company and pay from estate proceeds. Keep receipts and include the expense in the estate accounting.

Scenario 2 — Beneficiary wants items kept: If a beneficiary wants certain personal items rather than selling them, discuss options: have the beneficiary buy the items at fair market value, remove them from the sale inventory with beneficiary consent, or seek court guidance if there’s a dispute.

Scenario 3 — Disputed or large expense: If an expensive hazardous‑material cleanup is required, get a court order authorizing payment before incurring the cost to reduce personal exposure to liability.

Risk of personal liability

If you are the personal representative and you spend estate money improperly (for personal benefit or for expenses that are not reasonable or authorized), you can be held personally liable. Proper documentation, conservative decision making, and court approval for controversial actions reduce the risk.