My mother recently passed away in Florida while her uncle's estate was in probate in Alabama and she was due to receive $1000 from it. My father is also deceased and I am an only child.The lawyer had me sign papers stating I was the sole heir so that he could release her share to me now that the probate is done so I assumed the check would be made out to me. The check however is made out to her estate, but probating her estate was not necessary as she owned no property, her checking account has been closed, and she did have outstanding medical bills. It was my understanding that since her debts far exceeded any assets she had upon her death I was not required to go through probate. I don't know if I can deposit this check in my bank or not. If I can't, what happens to the money?
You should be able to cash the check under the laws of the state of Florida (which has jurisdiction over your mother's estate). Contact a Florida probate attorney and ask about 'small estate' provisions. Also contact your bank and ask about their requirements. Usually the bank will accept an affidavit (a declaration signed under penalty of perjury) that you are the proper recipient of the funds.
An easier path might simply be to ask the attorney for your uncle's estate to re-cut the check in your name.
Estate Planning Attorney
The attorney correctly made the check payable to the estate, and while you may not have needed to probate your mother's estate due to the lack of assets, you may now have a problem in that there are both creditors and assets. If the money is an estate asset it may be subject to the claims of creditors. I am a VA attorney, so I cannot provide more specifics about the law in your state, but I would encourage you to have a brief meeting with a local attorney to make certain any action you take will not constitute the defrauding of a creditor.
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It appears from your question that your mother had creditors that may have an interest in any asset of your mother (including that check), but there may be a mechanism under Florida law to allow that money to pass directly to you outside of any creditors. For instance, in Alabama, you may receive a reimbursement for funeral costs that you personally incurred prior to any creditors being paid. There may be something similar in Florida. I think it would be prudent to contact a lawyer to discuss these options prior to cashing or depositing the check.