In Florida, we call the administrator of the will the personal representative. Other states refer to this office as the executor. It’s much the same thing.
Just because you are named as the personal representative in your loved one’s will does not necessarily mean that you must serve. Before acting in this capacity, understand that the role is a fiduciary one—meaning that you have a duty to act impartially when administering the estate. This means that the personal representative has a legal duty to treat all of the other beneficiaries of the estate, as well as the creditors of the estate, fairly and in accordance with the law.
Often, the surviving spouse, adult child, or other family member is named to serve in the role as personal representative, and that person may also be a beneficiary. A beneficiary serving as the personal representative has a “conflict of interest” since they have a personal stake in the handling of their fiduciary responsibilities.
I am not suggesting that as a beneficiary, a spouse, child, or other loved one should not serve. What I am saying is that one must be especially conscious of this conflict, and should work closely with their attorney to ensure that they fulfill the responsibilities without prejudice. Usually this is accomplished just fine and without problem.
When acting as the personal representative, you will be interacting with the estate’s professional team, including the attorney, CPA, and financial advisor. The personal representative’s first course of action would be to provide the attorney the asset information of the estate . If you have the original will, you will need to give that to the attorney, who will file that with the probate court, along with the Petition for Administration admitting the will into probate and requesting the letters of administration be issued granting you the authority to serve.
Once you have the authority, then you (or your attorney’s office) will provide certified copies of the letters of administration to the various banks and brokerage firms to transfer the assets into estate name. You may also open an estate checking account from which you can write checks and pay the deceased’s bills.
The personal representative has a legal duty to preserve the value of the estate’s assets. When cash and investments are a part of the estate, the “prudent investor rules” apply. If the estate assets should drop in value significantly during the course of the administration and the personal representative did not follow the “prudent investor rule,” then the personal representative could be liable to the estate beneficiaries adversely affected.
The estate has the responsibility to notify “reasonably ascertainable” creditors by certified mailing. So you must provide your attorney the names, contact information, account numbers, and other pertinent information of any such creditors. Creditors may include mortgage lenders, doctors, hospitals, ambulance services, credit cards, and such other debts that your loved one may have had at the time of his or her death. The best way to provide your attorney this information is to copy him with recent bills, invoices, and statements.
In addition to notifying reasonably ascertainable creditors by certified mailing, your attorney’s office will publish a legal “Notice to Creditors” in the local newspaper.
Once the creditors are notified, they have a period of ninety days to file a claim against the estate. If they fail to file a claim within the statutory (legal) time period, they are forever barred from collecting their debt—unless they are a secured creditor such as a mortgage lender.
I’m often asked whether the personal representative or the beneficiaries are personally responsible for the decedent’s debts and obligations. The general answer to that question is “no,” so long as the legal creditor’s notice requirements are satisfied, and the person so inquiring is not a joint obligor under the account or debt in question.
But the general rule is thrown out the window if the legal requirements are not satisfied. That is when you may have to pay a valid creditor of the estate from your own pocket. Administrative trustees of a revocable trust should also pay close attention to the creditor notice requirements.
Another creditor question relates to invoices or bills in dispute. The probate court provides a venue to object to an incorrect or disputed bill. The personal representative generally has thirty days from the end of the creditor’s notice period in which to file an objection to a creditor claim. A valid reason for the objection must be alleged in the objection. If the creditor wishes to pursue the claim, then he or she has thirty more days in which to file a lawsuit against the estate.
If a creditor’s claim is filed and an objection is not filed within the legal time period, the claim is presumed valid.
Once the creditor’s notice period expires and all creditor claims are satisfied or otherwise dealt with, the personal representative should work with the estate’s CPA or tax return preparer to ensure that all proper income and estate tax returns have been filed, and that reserves to pay any tax due and preparation fees are accounted for.
If a federal estate tax return is due (Form 706), the estate must file it and pay the taxes due within nine months of the date of the decedent’s death.
Once the creditor claims and taxes are finalized, the personal representative must provide an accounting to the estate’s beneficiaries. Usually, the personal representative will give this information to the attorney, who will put it in the proper legal form to file with the court and serve on all of the beneficiaries. The accounting includes the following:
- The date of death value of the assets subject to the estate administration;
- Capital gains or losses on the sale or disposition of the assets;
- Income earned during the administration;
- Expenses paid or reserves to pay expenses;
- Professional fees (legal, accounting, tax);
- Personal representative fees;
- Costs of the administration;
- Other “significant transactions” as defined by the statute;
- Funeral and other related costs;
- Specific distributions or bequests;
- Amount available for final distribution;
- Proposed final distribution to the beneficiaries or to establish testamentary trusts as provided under the will
The beneficiaries have a stated period of time in which to object to the accounting, or may even waive a formal accounting. Once the accounting process is completed, the personal representative will petition the court to close the estate and discharge the personal representative from further responsibilities.
As you can see, this is a big job with a lot of responsibility. Florida law entitles the personal representative to take a fee for his or her services. A reasonable fee is prescribed under the statute. The fee would be ordinary income subject to income tax, the same as when professionals must pay income tax on the fees that they receive. Depending upon the circumstances of the estate in question, the personal representative may or may not wish to take a fee.
In addition to fees, the personal representative may be reimbursed for any costs that he or she forwarded on behalf of the estate. Costs include travel, hotels, meals, rental car, gas, phone, clergy tips, funeral expenses, reception costs, and such other reasonable expenses paid out of the personal representative’s own pocket. Cost reimbursement is not taxable as income to the personal representative, but is a valid deduction for the estate.
I’m often asked whether other family member’s costs of travel to the funeral can be reimbursed as an estate expense. The general answer to this question is “no.” The exception is when the family member is acting as an agent of the estate to assist the personal representative with a duty or obligation. An example of this would be to help the personal representative clean out the house, dispose of personal effects that have little or no value, or such similar duties. Keep in mind that any reimbursements or fees paid to agents who assist with these endeavors must be reasonable and will be reported on the final accounting, which all of the other beneficiaries will be entitled to review and object to.
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