Get Help When You Are Responsible to Administer an Estate
When faced with the task of administering an estate and or a trust, get help. As a personal representative and or trustee, you will be responsible if mistakes are made. You will owe duties of care to loved ones (family members), to the court (to comply with statutory requirements), to the federal and state taxing authorities (to properly report income tax and estate taxes), and to creditors of the deceased person who now want to be paid what they are owed. So, what does someone who is a personal representative or a trustee need to do? They need to take a deep breath and get help from a caring and qualified attorney.
There are many things to do and it is not always in a very clear and orderly sequence. There are people who have an interest that have certain rights. You will owe them duties of notice and careful recordkeeping. You will owe the estate a duty to act prudently with the assets.
The first thing you will need to do is to find the Will and or Trust and to get at least ten original death certificates. If you are named as the personal representative of the estate, you will need to apply to the court to be appointed as the personal representative. This involves submitting an application to the court with appropriate supporting documentation such as the original will and death certificate. You will need to get tax identification numbers for the estate, for the trust if there was one, and for the trusts that may be designated to receive funds. You will need to identify the assets in the estate. This is called creating an inventory of estate assets.
Once you have the authority to act (you have been appointed) and the assets are identified, you will need to properly categorize those assets (taxable or nontaxable, probate or non probate). It can take some time to properly identify all the assets a person owned. Letters may need to be written. Phone calls may need to be made. Of course, with advance planning, it is very likely that the attorney and the loved one will have an inventory of assets. If that was done, the task of identifying the assets should not be so difficult or time consuming. If there are trust assets (assets owned by a trustee), the trust will govern those assets. If there are assets such as life insurance and retirement accounts like IRA’s and 401’s, then the beneficiary designation on each of these assets will control their disposition.
The next thing to do is to value the assets (each one). Valuation is an entire subject within itself. For estate tax purposes, the value of an asset is what a willing buyer would pay a willing seller, neither being under any compulsion to buy or sell. Sometimes, a valuation person needs to be brought in but this is very rare.
After you have complied with all the paperwork related to notices to loved ones, and filing an inventory of probate assets, and paying creditors claims and the time period for creditors to make claims has expired, then you will be in the position of distributing to the beneficiaries what they are entitled to receive. Before making these distributions, you will want to obtain a signed statement indicating the recipient acknowledges that the amount hey are to receive is the proper amount they are entitle to receive and that they are absolving you of any further duties. You will need to know who is to get what. To determine that, you will need to know what governs what assets. You will need to know how to properly effectuate the transfer of assets. Often this requires deeds that need to be recorded.
As you can see, going it alone when faced with the above responsibilities is not wise. You alone will be responsible if things go awry. There are many things to know and to manage. The cost of failure is too much. What cost? The cost of lost dollars to taxes, lost dollars to excessive legal fees, lost dollars due to bad investments, family discord that does not heal itself, and personal liability for failure to fulfill legal duties owed to third persons. In short, if you find yourself named as a personal representative and or a trustee, get help.
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.