Question

After paying off debts and other charges, Michelle’s estate was valued at $9 million as of December 31, 2015, six months after the death of Michelle. Kearny is the personal representative of the estate. As of December 31, 2016, the value of the estate had decreased to $6.5 million. Summarize the procedures involved in appointing a personal representative. What are Kearny’s fiduciary duties and liabilities?

Answer 1

After a person dies, the person who handles wrapping up their personal obligations, such as paying bills, selling real estate and other property is termed as “legal representative.

A legal representative, or legal rep, is the person or entity who represents a person’s best interests after death. They are authorized to make decisions regarding matters related to the business and personal life of the person they represent. They handle administration of the decedent’s estate under probate law.

“Estate” is simply the legal term for all of the deceased person's belongings at the time of death, including money in the bank, jewelry and other valuables, real estate, boats, recreational vehicles and business interests.

A legal representative has “power of attorney”—meaning they have legal rights to make decisions about your belongings. To buy and sell goods, pay bills, and direct actions about anything and everything comprising your estate.

Executor of an Estate

A common type of legal representative is the executor of a deceased person's estate, which is typically named in the will. If no person or entity was named, or if the person died “intestate” (without a will), one can file to become executor through the county’s probate court where the decedent lived, or where they owned real estate if they lived elsewhere.

Administrator of an Estate

When a person dies without a will, probate court will appoint someone to be in charge of the estate. That person is referred to as an administrator. The duties are essentially the same as an executor, except an administrator is court appointed rather than chosen by the decedent.

"Personal representative" is used interchangeably with both executor (named as such in the will) and administrator (named by the courts to handle the estate). It’s the person in charge of someone’s estate after they die.

Decedents usually name individuals in their wills to oversee probate of their estates. When a decedent leaves a will, this person is called his “executor.” The executor can submit the will to the court for probate and the court will usually honor the decedent’s wishes, swearing that person into office. If the named executor is incapable of doing the job for some reason, because he suffered a disability since the time the decedent named him, for example, the court must appoint someone else to manage probate instead. An executor can also decline to take the job because he simply doesn't want it. When this occurs, the court will appoint someone to the position and this person is called the estate’s “administrator.’’ The court will also appoint an administrator if the decedent dies without leaving a will that names an executor, or without a will at all. In most states, family members and other interested parties may petition the court, requesting appointment as administrator.

Duties of Personal Representative

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.

The primary duty is to protect the estate in a manner consistent with the decedent’s wishes.  

Personal Representative is responsible for collecting the assets of the estate, protecting the estate property, preparing an inventory of the property, paying various estate expenses, paying valid claims (including debts and taxes) against the estate, representing the estate in claims against others, and eventually distributing the estate property to the beneficiaries. In the event the decedent passed away with a Will, the Will may often impose additional duties on the Personal Representative that are not required by law.

Opening the Estate

Personal Representative must open the estate by filing the Petition for Probate documents. This requires presenting the Death Certificate along with certain other paperwork to the Register of Wills (or applicable Court).

Identify Assets of the Estate

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.

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.

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

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.

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.

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.