When you write a last will and testament, you name someone to handle your estate after you pass. That person is called a “personal representative” or “executor.” People often struggle over who to choose for what can be an enormous responsibility and thankless task. Here are some of the most common questions that people have about them.
What Does a Personal Representative Do?
The main job of your personal representative is to carry out the instructions in your will. They notify your creditors, settle your debts, and pay funeral expenses. They also communicate with your beneficiaries and distribute your estate.
A personal representative must also:
Preserve and inventory your assets and get appraisals
Identify and send notice to creditors and beneficiaries of the estate plan
Set up a bank account for the estate to collect and disburse funds
Manage, sell, or transfer your assets and investments, including real estate
Continue, sell, transfer, or close your business if you own one
File a final accounting for the probate court and a final income tax return with the IRS
Who Should I Choose?
When choosing a personal representative, look for someone trustworthy, organized, and tough. Don’t worry about finding the smartest person you know. Your personal representative can hire attorneys or accountants to help with probate and file final estate tax forms.
Your personal representative should be someone you trust. They will handle your assets and look out for your beneficiaries’ best interests. Additionally, the state will also hold them to a “fiduciary duty,” so the state may remove your personal representative if they are not putting your beneficiaries first. For significant breaches of fiduciary duty, your personal representative may be liable for fines or criminal charges.
If you have minor children, your personal representative will hold funds in trust until they reach the legal age to inherit. They also manage the assets and provide for your children’s education, maintenance, support, and health care.
Settling an estate can take anywhere from 12 to 18 months and involves a lot of paperwork. There are deadlines to meet and tasks to complete. Your personal representative handles forms and keeps in touch with creditors and beneficiaries.
Because your personal representative distributes your estate to your beneficiaries, they may have to stand up to unhappy family members or deal with family conflicts. They also settle creditor claims and lawsuits.
Can You Pay a Personal Representative?
Because estate administration takes a lot of time, states generally allow a personal representative to receive reasonable compensation from the estate’s assets. Some states, such as California and New York, set a schedule of fees based on the size of the estate.
If your personal representative is a family member or close friend, they may not charge the estate for their time, especially if they expect to receive a share of your estate. While inheritance is not taxable unless you live in a state that charges inheritance tax, personal representative pay is taxable income for them.
Should I Name Co-Personal Representatives?
You may want to keep peace in the family by naming more than one person as your personal representative. However, resist the temptation to name co-personal representatives. While you may want to include both your son and daughter in the decision-making, it can lead to disagreements in the best-case scenario and litigation in the worst. Discussing your estate and your wishes with your family ahead of time can also help to limit disagreements like these.
Instead, name one as the primary personal representative and the other as the secondary. Then, if the primary personal representative is unwilling or unable to fulfill their responsibilities, the secondary can step in and assume control.
And remember, your personal representative has a fiduciary duty to act in the best interests of the beneficiaries. Therefore, they should routinely update the beneficiaries about the probate progress.
What if I Can’t Think of Someone?
You still have options if you don’t have a family member or friend to serve as a personal representative. For example, you could ask your accountant, attorney, or even bank or financial institution to act as your personal representative. It may also be a good idea to have a neutral party if you have an especially tricky family situation where family infighting may occur.
What Information Should I Give My Personal Representative?
First, you should ask your personal representative if they are willing to serve. Can they handle the responsibilities of administering your estate? Second, give your personal representative a copy of your last will and testament and information about your assets, liabilities, and beneficiaries. And finally, you may share any helpful information about dealing with beneficiaries, creditors, business partners, and others.
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