There are a number of factors to be taken into consideration when selecting a personal representative, or agreeing to accept the position of personal representative. Acting as a personal representative involves a great deal of work depending upon the assets and complexity of the estate. For example, an estate with large investment portfolios, property in more than one state, and a functional business usually means far more responsibility than a modest or smaller estate.
Many people agree to be named as personal representative without considering that the task may be more difficult than expected. Furthermore, personal representatives are bound by law to observe a strict standard of care when fulfilling their duties. A personal representative can be held legally liable for the negligent handling of an estate.
Understanding the following possible duties of a personal representative will help you make an important decision about whether to agree to be named and/or serve as a personal representative:
Interact with various people after death. This includes family members, employers, business partners, attorneys and accountants.
Cancel accounts. This includes the decedent’s credit cards, various services, certain bank accounts, and the like. This usually means hiring a lawyer to petition the court to probate or approve the Will. As part of this process, the personal representative is formally appointed, after which the personal representative has the power to administer the estate.
Locating estate assets. This means finding all of the decedent’s assets, which in some cases can be very difficult. Most people have a difficult time inventorying their own assets, much less doing the same for someone else.
Value each asset. Assets need to be valued as of the date of death both for estate tax purposes and to provide heirs with a tax basis (usually the date of death value). Some assets may require an independent appraisal.
File tax returns. Depending upon the estate, tax returns that need to be filed might include federal and estate tax returns, the decedent’s final income tax returns, a final gift tax return, and an income tax return for the estate.
Handle debt. The personal representative must determine the debt owed by the estate and pay most debt out of the estate bank account. In some cases, claims by creditors need to be contested by the personal representative.
Account for all assets during administration. The personal representative needs to make an accounting of the assets of the estate during the administration, particularly near the closing of the estate. This accounting will include costs to administrate the estate, as well as increases and decreases in the assets of the estate which may have occurred after commencement of the probate proceeding.
Distribution of the estate assets. After estate assets have been located and accounted for, and claims against the estate have been resolved, it is the personal representative’s responsibility to distribute the assets of the estate in accordance with the decedent’s wishes. Prior to distribution of estate assets, the personal representative is responsible to manage the assets.
The foregoing are just some of the duties of the personal representative. Although it is a privilege to serve as a personal representative, if you are not sure you can handle the responsibility of administrating the estate it may be wise for you to decline the appointment. As an alternative, you could serve as a co-personal representative with a professional or institution that has the expertise needed to handle the responsibilities of a personal representative.
For more information on personal representatives, please contact Nic Wenner at 612-355-2202.