A Personal Representative, or an Executor, of an estate is an individual or institution designated to administer the decedent’s estate. As a fiduciary, a Personal Representative must settle and distribute the estate of the decedent as efficiently as possible by adhering to the directions outlined in the decedent’s Last Will and Testament and the probate laws of the state where the estate is being administered.
The primary duty is to protect the estate in a manner consistent with the decedent’s wishes. Although this may appear relatively simple, it is important that the Personal Representative understand the responsibilities associated with the position. As a word of caution, failure to adhere to these duties and responsibilities can result in the filing of lawsuits against the Personal Representative of the estate for breach of fiduciary duty.
Generally speaking, a Personal Representative is responsible for collecting the assets of the estate, protecting the estate property, preparing an inventory of the property, paying valid claims (including debts and taxes) against the estate, representing the estate in claims against others and distributing the estate property to the beneficiaries. However, the Will can impose additional duties on the Personal Representative that are not required by law.
Identify Assets of the Estate
Initially, the Personal Representative must identify and collect the assets of the estate. This includes any property of value owned by the deceased at death. For example, assets of the estate include any unpaid amounts due the deceased such as interest and dividends. Although often overlooked, to properly value the assets of the estate, an underlying responsibility of the Personal Representative is to have the assets professionally appraised. This course of action is not only essential when it is difficult to determine how much an asset is worth but because certain assets require an appraisal by a qualified appraiser. Typically, within a certain time frame of the appointment of the personal representative, an Inventory Report and an Information Report must be filed. These reports list the assets held by the decedent, both individually and jointly, and provide the value of such assets.
Provide Notice to Creditors
As part of the administrative duties, the Personal Representative must give legal notice of the decedent’s death to known creditors and potential creditors. Creditors generally have a prescribed time in which to file claims against the decedent’s estate. Upon the expiration of this period, the personal representative must pay all legitimate claims against the estate. It should be emphasized that prior to payment, the Personal Representative should consider the validity of all claims against the estate.
Initial Accounting of Financial Activity
An initial account of the estate’s financial activity must be filed by the Personal Representative. Moreover, there are various fees that will be incurred by the estate as part of the probate process. For example, the Personal Representative may seek assistance from other professionals, such as an accountant or attorney. Such expenses, incurred in protecting or administering the estate, would appear on the account and are subsequently paid by the Personal Representative out of the estate’s funds. In essence, this account consists of an itemized list of all payments and receipts. After the initial account, the Personal Representative may be obligated to file subsequent accounts at various intervals.
Preparation and Filing of Tax Returns
In addition to the accounting, the Personal Representative is responsible for preparing and filing all applicable state and federal income tax returns on behalf of the decedent for the period of time the decedent was alive and on behalf of the decedent’s estate. It is important to remember that death terminates the decedent’s tax year and thereafter the decedent’s estate is a separate taxpayer. The Personal Representative is also responsible for paying all applicable state and federal estate taxes. These responsibilities may include at least four separate sets of tax returns: (i) the decedent’s final income tax returns; (ii) the estate’s income tax returns; (iii) the estate tax returns; and (iv) any gift tax returns. Each return has a specific due date and in some instances a tax return may be required to be filed even when no taxes are due.
Distribution of Assets and Closing the Estate
Once all of the assets are collected and the claims are satisfied, the Personal Representative must distribute the assets consistent with the terms of the Will or the state’s probate laws. When the court approves the final account and the assets have been distributed, the estate is considered closed. At this point, the responsibilities of the Personal Representative end. For your convenience, the link below contains an estate administration checklist to assist you in carrying out your duties as Personal Representative.