A Personal Representative, the common wisdom goes, collects your assets, pays your debts, and distributes the remainder to your heirs. This seemingly simple exercise in addition, subtraction and division is — in reality — amazingly complex. Most of what a Personal Representative does is either administrative or tax related. The administrative responsibilities can begin even before a probate court has issued Letters Testamentary (the document granting the Personal Representative to act on behalf of the Estate).
For example, a Personal Representative may be asked to:
- Help make funeral arrangements
- Locate the will
- Talk with the lawyer who will serve as attorney for the estate and help arrange for probate of the will
- Meet with family members to determine their immediate needs;
- Make tentative financial arrangements any dependents’ support during the estate-settlement period
- Seek court authority to act as the Personal Representative
Once the court issues Letters Testamentary, the Personal Representative’s “real” duties begin. The executor must:
- List and locate the estate’s assets, including cash, personal and household items, and stocks and bonds
- Take custody and control of the estate’s assets
- Safeguard those assets — by securing adequate insurance, for example, or by placing items in a safe or vault
- Collect money owed to the estate
- File claims for pension and profit-sharing plan benefits, Social Security benefits, and veterans’ benefits
- Notify creditors of the death and pay all valid debts
- Take necessary legal action, either to collect substantial unpaid sums owed to the estate or to defend the estate against doubtful or exorbitant claims
- Manage the estate’s assets — a job that may include overseeing the investment portfolio, collecting rents, and running closely held business, among other things
- Sell assets, as directed by the will or as required by law to pay estate expenses or legacies
- Distribute assets to the beneficiaries
- Keep accurate records of all estate transactions; and
- Submit a detailed accounting to your beneficiaries or to the probate court — or both.
Obviously, depending on the nature of the estate, the Personal Representative will need certain skills — financial responsibility, investment expertise, business acumen, knowledge of accounting, and more.
A Personal Representative’s tax-related responsibilities may require even greater talents. The tax aspects of handling an estate can be extremely complex. A Personal Representative must:
- File final personal income tax returns
- Choose a tax year for the estate
- File the estate’s income-tax returns
- File State and Federal estate tax returns, if required
All of these can be difficult endeavors, especially completing and filing the federal estate-tax return. In addition to contending with the nuances of the unified estate- and gift tax rates, a Personal Representative will have to come up with detailed valuations of your assets (both at the time of your death and at the “alternate valuation date” six months later).
Investments and insurance offered through the Trust Department of First National Bank & Trust Co. are not insured by the FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or any bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.