If you have been named as a Personal Representative of an estate, you will take on this difficult task during a time of grief and perhaps even tumult and upheaval for you and your family. As a law firm specializing in this area, we will be there to assist you with the process, This guide is intended as a relatively brief summary of the steps involved, as well as your duties and responsibilities.
Steps to Administer an Estate
- Locate the Will
- Probate the Will
- Protect the Assets
- Inventory the Assets
- Payment of Debts
- Preparation of Tax Returns
- Transition of Assets to Trustee (if necessary)
- Final Accounting and Distribution
What must be done?
A Personal Representative’s duties and responsibilities are well defined. If there are probate assets, the Will must be “probated.” To have assets “probated” simply means to have the assets subject to a court’s supervision before the assets can be transferred to the intended beneficiaries. All assets of the estate must be located, identified and protected. Debts, taxes and expenses must be paid. The net estate is distributed to the beneficiaries as directed in the Will, and finally, the Personal Representative must itemize and account for everything.
How long will it take?
The administration of an estate is necessarily time consuming and usually requires a year or more to complete. Although it might take a year or two to settle an estate in a way that preserves as much as possible after taxes, this does not mean that estate funds are not available in the meantime. Every effort will be made to meet the financial needs of a surviving spouse and children, and partial distributions will be made whenever possible.
Locating the Will
The Will may be held by the attorney’s office that originally drafted it, in a safe deposit box or perhaps among other important papers. The original Will will need to be located in order to file it with the Court to commence the probate proceeding.
Probating the Will
Once the original Will is located, it must be filed with the Probate Court along with additional documentation requesting that a Personal Representative be officially appointed to act. The Court will issue an Order confirming the Will is valid and granting administrative powers to the Personal Representative. Copies of the appointment of the Personal Representative will be sent to all parties having a legal interest in the estate and will also be published in the county’s legal newspaper to give notice to all creditors. Most importantly, the Court will issue Letters Testamentary which serve as evidence that the Personal Representative has authority to act on behalf of the estate to complete all administrative duties, sell real estate, etc.
Protecting the Assets
Initially the Personal Representative must locate all assets owned by the decedents and determine that they have adequate protection and insurance. Securities and valuables are collected and safely stored. Safe deposit boxes are opened and the contents are inventoried. Arrangements must be made for the care of real estate, automobiles, and any living assets, such as pets.
Inventory of the Assets
Once all the assets are located and protected, the Personal Representative must promptly compile a list (“inventory”) of the assets. All assets should be listed and valued as of the date of death, including real estate, home furnishings, collectables, works of art, cash, bank accounts, stocks and bonds, etc. At the same time, a list is compiled of all items that passed by way of “beneficiary designation” (e.g., life insurance, retirement accounts) or by joint ownership (such as an account co-owned by another owner). Real estate, closely held business interests, and collections of art or antiques may require the services of an outside expert or appraiser to determine the fair market value.
Payment of Debts
Following death, the Personal Representative will need to gather information about the existence and nature of any possible debts owed by the decedent, determine the validity of those debts, and pay those valid debts out of assets previously owned by the decedent. The Personal Representative is also responsible for paying all funeral expenses and expenses of administering the decedent’s estate. The Personal Representative should contact all known creditors to let them know of the decedent’s death, and valid bills and claims presented for payment should be paid promptly. Of course, records of all payments must be kept. In addition, all debts owed to the estate must also be collected at this time.
Preparation of Tax Returns
As Personal Representative, you are responsible for filing the final state and federal income tax returns for the decedent as well as the estate tax returns, if necessary. It is important that you understand that you could be held personally liable for failure to file (and/or pay) the decedent’s income tax liabilities. The decedent’s final “taxable year” is considered to have ended on the date of death, and not on the 31st of December.
In the event that an estate or trust is created as part of the decedent’s estate plan, it will be necessary to address the income tax characteristics of this newly-created entity. As a separate legal entity, the trust or estate will need to separately report all items of income or loss specific to its administration.
Each entity, the estate and/or the trust, will require a tax identification number to be assigned by the IRS. This number will be needed to open any financial accounts in the name of the estate or trust, as well as to file the tax returns.
Transition of Assets to Trustee
If the Will creates one or more trusts or directs that any probate assets remaining after settlement be paid into an existing trust, you will work directly with the Trustee to facilitate the transfer of the assets into the Trust(s).
Final Accounting and Distribution
The last duty of the Personal Representative is to prepare a complete record of the administration of the estate including all income, expenses and disbursements. Once the final accounting has been prepared, copies are sent to all beneficiaries with their final distribution checks in accordance with the terms of the Will.
While this process may seem overwhelming, Erickson & Wessman, P.A. will be helping you through it step by step. We will be here to facilitate the procedure to make it as uncomplicated and stress-free as possible. Please feel free to call or email us with questions or to schedule an appointment to discuss this in more detail.