Submitted by Bay Point Wealth Management on October 28th, 2015
Personal Representatives of estates are individuals or institutions nominated under the decedent’s Last Will and Testament and recognized by a Court to administer the estate in accordance with the Will’s terms. Following the Last Will and Testament, as well as probate laws of the state where the estate is administered, the Personal Representative takes on the role of a fiduciary, protecting, settling and distributing the estate as efficiently as possible. In this role, Personal Representatives are often asked to:
- Evaluate and pay valid claims (including debts and taxes) against the estate. This process often requires publishing legal notice in a newspaper to notify creditors and potential creditors of the decedent’s death. Often, there is an open period during which creditors can file claims against an estate; after that period, the Personal Representative is responsible for paying any legitimate claims, which were properly filed, before the estate can be closed.
- Locate and collect the assets of the estate, including property (of value) owned by the deceased at death. Some of these assets may require professional appraisal before being included in an Inventory Report and an Information Report.
- Protect and account for estate property, which includes performing and filing an initial accounting of the estate’s financial activity (i.e., a list of all payments and receipts, including fees from other professionals, such as accountants and attorneys). Subsequent account filings may be required of the Personal Representative at varying intervals.
- Prepare and file applicable state and federal income tax returns on behalf of the decedent. Generally, a Personal Representative files returns for the time the decedent was alive and on behalf of the estate. Remember, the decedent’s estate becomes a separate taxpayer the year after the decedent’s tax year is terminated. This means a Personal Representative may be filing at least four separate tax returns (i.e., the decedent’s final income tax returns, the estate’s income tax returns, the estate tax returns, gift tax returns). Each has a certain due date and, in some cases, filing may be required even when no taxes are due.
- Represent the estate in claims against others. A Personal Representative has the power to decide if the estate will pursue claims the decedent had against others.
- Distribute estate property to beneficiaries once all assets are collected and claims are satisfied. Distribution should follow the terms of the decedent’s Will or state probate laws. Once this process is complete and the court approves the final account, the estate is considered closed, and the Personal Representative’s duties have been fulfilled.
While the role of the Personal Representative may not seem overly complicated, it does involve significant fiduciary duties. Violating or ignoring such duties can lead to a Personal Representative being sued for breach of fiduciary duty.