July 1st, 2020
Duties of a Personal Representative/Executor
Author: Micah A. Bonaviri
A Personal Representative (commonly referred to as an Executor) of an estate is an individual or institution designated to administer the estate of a decedent. 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/or the probate laws of the state where the estate is being administered. This is often, but not always, the place the decedents resided at his/her passing. Although the procedures differ across jurisdictions, we believe the overall approach outlined in the summary below provides a great overview of the general considerations and process.
The primary duty of a Personal Representative 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 opening the estate, collecting the assets of the estate, protecting the estate property, preparing an inventory of the property, paying various estate expenses, valid claims (including debts and taxes) against the estate, representing the estate in claims against others, and eventually distributing the estate property to the appropriate beneficiaries. For purposes of this Article, a brief summary of each of these steps is provided below.
Opening the Estate
Initially, the Personal Representative must open the estate by filing the Petition for Probate documents. This requires presenting an original Death Certificate along with certain other paperwork to the Register of Wills (or applicable Court). Generally, an estimate as to the date of death value of probate assets must be provided as well. Once the estate is opened, the Personal Representative will obtain the necessary Letters of Administration, which provide the Personal Representative with the legal authority to act on behalf of the estate. Until these Letters are obtained, the named Personal Representatives (as well as any other family members) may find it difficult to gather information in connection with the assets of the decedent’s estate.
Identify Assets of the Estate
Thereafter, it is important to 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 generally include, real property interests, business interests, checking and savings accounts, brokerage accounts, and 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 the value of an asset but it becomes necessary when 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 date of death value of such assets.
Opening of the Estate Account
Once the estate is properly opened, a Federal Tax ID Number should be obtained for the estate. The Personal Representative will need to present this separate Tax ID Number to a bank to open a new bank account (typically checking account) in the name of the estate. Thereafter, the Personal Representative will transfer the funds from the accounts in the decedent’s name at death to the new account in the name of the estate. Expenses, taxes, debts and other fees in connection with the administration of the estate will be paid from this new account. Eventually, any remaining funds will be distributed to the beneficiaries of the estate along with any other remaining 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 (six months in Maryland) 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. Failure to file a claim against the estate within the prescribed time frame forever bars future claims from a creditor (although not all state and federal claims). 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:
- the decedent’s final income tax returns;
- applicable federal and state income tax returns of the trust or estate;
- applicable federal and state estate tax returns; and
- 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.
Contact Our Firm
Serving as the Personal Representatives of an estate can often appear overwhelming and a little challenging. In the event you have questions regarding this Article or the estate administration process, please contact a member of our Estate Planning Department.