What role does the personal representative play under a will?

The Personal Representative (Executor/Executrix or Administrator/Administratrix) is the person you name (nominate) in your Will to handle your real estate property and has a legal responsibility to act in your estate’s best interests. You can also name Alternatives if for some reason your chosen Personal Representative can’t act for you. An administrator commonly settles intestate estates where the decedent died without leaving a valid last will and testament. In fact, they might have left a will but forgot to have named a personal representative, or the representative is unable to help.

If your Personal Representative and all the Alternatives are unable to act, the probate court will name a person to fill this role. Executors are entitled to receive a fee for these services from the money in the estate property. The amount of that fee varies from state to state.

What are the tasks of a personal representative?

The duties of a personal representative or executor generally include a wide range of tasks.

(1) Obtain the Will;

(2) Obtain certified copies of the death certificate;

(3)Getting date-of-death values for your probate assets

(4) Find the beneficiaries of estates named in the Will and all other individuals who must be notified about the Will (such as children of the decedent who aren’t named in the Will);

(5) Determine if there are any probate assets;

(6) File a petition with the probate court if the probate process is required under the laws of the state;

(7) Identify, gather, and inventory the assets of the deceased person;

(8) Receive payments due to the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits);

(9) Set up a checking account for the estate;

(10) Figure out who is going to get what and how much under the Will;

(11) Value or appraise the estate’s assets;

(12) Give legal notice to creditors (the procedure and deadlines for creditors to file creditor claims vary from state to state);

(13) Prepare and file tax returns (final personal income tax returns, both federal and state if applicable).

(14) Prepare the estate tax returns if your estate is significantly large or if your state requires estate taxes.

(15) Investigate the validity of all claims against the estate;

(16) Pay funeral bills, outstanding debts, and valid claims;

(17) Pay the expenses of administrating the estate (operating expenses must be paid before probate closes and property can be legally transferred to beneficiaries);

(18) Handle various paperwork, such as discontinuing utilities and charge cards, and notifying Social Security, Civil Service, and Veterans Administration of the death;

(19) File and pay income and estate taxes;

(20) Distribute the remaining property in accordance with the instructions provided in the will of the deceased individual (court approval is necessary for the distribution of assets)

and (21) Close probate.

Your personal representative must collect values for non-probate assets as well if your estate owes estate taxes because both are included in your taxable estate.

The Personal Representative doesn’t have to do all of this him or herself. A Personal Representative is allowed to hire a probate lawyer when necessary and pay the legal fees out of the estate.

Since your Personal Representative is given access to all property in the probate estate, the selection of a competent and trustworthy person is very important. It is wise to nominate someone who has business experience, intelligence, and the utmost integrity and honesty to serve as your Personal Representative.

Most states require the Personal Representative to post a surety bond covering his/her actions. This requirement can be waived if your Will states that you want your nominated Personal Representative to serve without bond.

Who will pay the estate tax?

The estate tax is required on the transfer of the estate of the decedent to his lawful heirs, beneficiaries, or whoever has power of attorney based on the fair market value of the net estate at the time of death of the decedent.

Your gross taxable estate is the total value of everything you have – both probate assets and property that goes directly to a living beneficiary. The estate tax exemption is subtracted from this total value, and the tax is due on balance.

Only estates that cost more than $11 million are subject to the federal estate tax on the balance over this amount. Some states also require an estate tax, but some have much lower exemption thresholds. The estate tax exemption might not apply only to the estate. It can also include any gifts made before the death of the estate owner (if these gifts surpassed the annual exclusion for gift taxes: $15,000).

What does the administrator of a trust do?

Trusts are created to differentiate between income and principal (older trusts provide for income to be distributed to one person at one time and principal to either that same person at a different time or to another person entirely). Many trusts for a surviving spouse provide that all income must be paid to that spouse. When the spouse dies, the remaining principal may be paid to the decedent’s children, charity, or other beneficiaries.

Income payments and principal distribution can be made by check, or at the trustee’s discretion by issuing securities as well as cash. During the period of administration, the fiduciary must present an annual income tax statement to each beneficiary who is taxable on any income earned by the trust. The fiduciary can hold personal liability for interest and penalties if the income tax return is not filed and the tax paid by the due date.

To sum up, after an individual’s death, executors will gather the assets, settle business and financial affairs, pay debts, file tax returns, and distribute assets in the name of the deceased individual or the decedent. These duties generally will be conducted on behalf of the decedent by either an executor or an administrator (if the person dies without a will) or a trustee, depending upon how the decedent held the property. The administrator is appointed by the Probate Office or the Register of Wills office having jurisdiction over the decedent’s estate. That person could be one or more individuals, a bank or trust company, or both. After debts, taxes, and expenses are paid, the remaining assets are distributed to the decedent’s beneficiaries.

Serving as a personal representative can be a huge responsibility, so you should be careful when choosing the right person. You should be able to do that with the help of your estate planning attorney.

Case Studies: Understanding Executor and Trust Administrator Responsibilities

Case Study 1: The Dutiful Executor

John Thompson, a successful businessman, passed away, leaving behind a substantial estate and a detailed will. Sarah Miller, his trusted friend and business partner, was named as the executor in his will. Sarah’s responsibilities included obtaining a copy of the will, acquiring certified copies of John’s death certificate, and locating and contacting all beneficiaries mentioned in the will.

She diligently worked with an estate planning attorney to determine if any probate assets existed and, if necessary, filed a petition with the probate court. Sarah undertook the task of inventorying John’s assets, including real estate, investments, and personal belongings. She opened an estate checking account to receive payments due to the estate and managed all financial transactions meticulously.

Sarah also ensured that all debts, including funeral bills and outstanding creditors, were paid promptly. She filed the required tax returns, both at the state and federal level, and distributed the remaining assets according to John’s wishes as outlined in the will. Sarah’s expertise and attention to detail ensured a smooth and efficient administration of John’s estate.

Case Study 2: Navigating Estate Taxes

After the passing of Mary Johnson, her family faced the complexity of estate taxes. Mary had a sizable estate, including valuable properties and investments. Her estate planning attorney advised her on potential tax implications and helped structure her estate plan accordingly. However, due to changes in tax laws, Mary’s family faced uncertainty about the estate tax obligations.

Mary’s estate exceeded the federal estate tax exemption, which meant that her estate was subject to federal estate taxes on the balance over the exemption amount. The family engaged a tax attorney and an experienced accountant to navigate the complexities of estate tax calculations and filings. They carefully evaluated the estate’s assets, including any gifts made before Mary’s death, to determine the taxable estate’s fair market value.

Collaborating with their professional advisors, Mary’s family fulfilled their tax obligations and ensured compliance with both federal and state estate tax requirements. They were relieved to have expert guidance throughout the process, which helped them minimize tax liabilities and preserve the wealth intended for their family and charitable causes.

Case Study 3: The Responsibilities of a Trust Administrator

After the passing of Richard Anderson, his substantial estate was placed in a trust for the benefit of his three children. Emma Turner, a respected attorney specializing in trust administration, was appointed as the trust administrator. Emma’s responsibilities included managing the trust’s assets, ensuring income payments to Richard’s surviving spouse, and ultimately distributing the remaining principal to the children upon the spouse’s passing.

Emma carefully reviewed the trust’s terms and communicated with financial institutions, such as banks and investment firms, to consolidate and manage the trust’s assets. She prepared an annual income tax statement for each beneficiary who received income from the trust and ensured compliance with tax obligations.

Additionally, Emma worked closely with the beneficiaries, providing them with regular updates on the trust’s performance and addressing any questions or concerns they had. She maintained detailed records, filed necessary tax returns, and managed the trust’s investments prudently to maximize growth while protecting the beneficiaries’ interests.