Congratulations! You just found out you have been named as the personal representative of an estate! So, now what? Well first you need to understand how you got here. You may have been selected personally by the decedent to carry out this responsibility; as such you may consider this an honor and a curse. If the decedent died without a will (intestate), you were probably nominated by either family or friends; in this case just consider it a curse!
You will be issued "letters" from the court, which say that you have been appointed personal representative. These letters are evidence that you have authority to act on behalf of the estate. You will need to show or send them to various third parties, such as banks, insurance companies, etc., when you are administering the estate.
Opening and Closing of the Estate
Generally, you can choose how you will formally open and close the estate and the extent of court supervision over your activities as a personal representative.
Formal proceedings will result in final and binding court orders and involve notice being sent to interested parties (beneficiaries, creditors, etc.) about actions to be taken. There may be a court hearing if an interested party objects to your actions. This option is also used if something in the case is out of the ordinary. For example, statutes may require formal opening if the will is irregular. Formal proceedings may also be used to settle a dispute, such as if family members disagree over who should be the personal representative. With informal proceedings, there is no advance notice to parties and no binding orders from the court. This option is chosen when there are no controversies or aspects of the case that are out of the ordinary. Sometimes estates are opened informally, but closed formally, so as to get the protection of a court order for the personal representative that everything has been done correctly.
Your Specific Duties
collecting and taking an inventory of estate assets, and be sure they are protected during your time of administration;
- you must manage the assets until the estate is closed, paying the estate bills, including claims of creditors, expenses of administration and any taxes; and
- making distribution to the heirs or the beneficiaries under a will.
The law expects you to be impartial to any one creditor or beneficiary. You cannot favor one person or yourself over others involved in the estate. Remember, you have a fiduciary responsibility to properly handle the money and assets of others.
Detail of Responsibilities
•1. Prior to appointment: A person named PR in a will has the power, prior to appointment by the court, to carry out written instructions of the deceased relating to the body, funeral, and burial arrangements. The PR may begin to take and protect the decedent's property.
•2. Accounting: The PR sets up an estate accounting system at the beginning of administration of the estate. For your protection, keep records of all cash and other financial transactions of the estate and provide written accountings to the beneficiaries. This is very important and often not done correctly. In a supervised administration or with a formal closing, the accounting forms are filed with the court. This information will also be required for tax purposes.
•3. Inventory: Within three months, you must prepare a written inventory of the estate assets on a court-approved form. If you decide to close formally, the inventory must be filed with the court. Otherwise, just give a copy to interested parties.
Making sure that all proper bills are paid is an important part of your job. Send a Notice of Appointment to known creditors such as credit card companies, physicians, banks, etc. that the person has died and you are the personal representative.
•4. Notice of Appointment: Promptly after your appointment, the PR must prepare a Notice of Appointment form and send this to all those interested in the estate (such as beneficiaries and unpaid creditors) and file proof with the court that this notice was sent. This notice form is to let the interested persons know the facts and ground rules regarding administration of the estate, including your name and address, and the court in which the papers are on file.
•5. Creditor's Claims: Making sure that all proper bills are paid is an important part of your job. Send a Notice of Appointment to known creditors such as credit card companies, physicians, banks, etc. that the person has died and you are the personal representative.
You should publish another notice in the newspaper for unknown creditors. If creditors don't send you a bill within four months after first publication the claim should be forever barred. If you don't publish a notice, the time for unknown creditors to make a claim against the estate is extended to a year from the date of the decedent's death.
A claim may be given to you or filed with the court. No specific form is required. A bill that comes in the mail is a properly presented claim (but don't pay bills that are only presented orally). If you disagree with the claim, you have 60 days to tell the claimant in writing. They then have 60 days to begin proceedings to enforce the claim.
It's a good idea not to pay any claims until you've determined what they are, and until you've reached the end of the time in which someone can make claims.
•6. Family Protection: Allowances: Monetary allowances for certain family members, such as surviving spouse or minor children, during the period of administration are set by probate code but may be modified by court order. Where the family is entitled to these allowances, they have priority over creditors.
•7. Management and Investment: As personal representative, you're responsible for managing the estate until it is distributed. What you can and can't do may be specified in the will or by Colorado's probate code.
Once you're appointed, you have full authority and control over the assets the decedent owned in his name alone or as a co-tenant with others. (Property held in joint tenancy with right of survivorship is not a probate asset, nor are proceeds of life insurance that are payable to a named beneficiary other than the estate.)
To put others on notice of your authority, re-register the decedent's assets in the name of the estate with you listed as personal representative (you will use your letters of appointment as evidence of your authority). For registered stocks and bonds, submit your letters of appointment to the transfer agent, along with the securities and an affidavit of domicile, which you get from a broker or a bank. If you need to sell some securities to raise money for estate expenses, you can do so without having the securities registered first, although it usually takes longer to get the proceeds. Bearer bonds need not be re-registered. When you sell or distribute any real estate, you will need to use your letters of appointment.
•8. Tax Responsibilities: The PR files the final income tax returns for the decedent as well as any gift tax returns. Both Federal and State estate tax returns must be filed if the estate is of sufficient size. There is also a separate income tax return that must be filed for the estate. When a person dies, his taxable year ends on the date of death and his income and deductions are reported through that date. The estate is a separate income tax paying entity and the PR must get a separate tax identification from the IRS.
•9. Bond: A surety bond may be required by the terms of the will or by court order, and bond premiums are payable out of the estate as an administration expense.
•10. Compensation: You may choose to be compensated for your duties as personal representative. Your compensation and that of your attorney is subject to a "reasonableness test" under the Colorado Probate Code. Family members often serve without pay, except for out-of-pocket costs. If you do this, consider filing a fee waiver with the court. If you take compensation, you must keep a detailed record of tasks performed and the time spent. Your attorney should also. Your compensation will be taxable as ordinary income.
The assets of the estate belong ultimately to the beneficiaries and not to you. Make distributions to beneficiaries as soon as it can be done safely.
•11. Distribution: Generally, estate assets are paid in this order: those held by the decedent as a fiduciary, such as if the decedent was serving as a trustee of a trust at the time of death; family allowances; expenses of administration; funeral costs; debts and taxes under federal law; amounts expended by Colorado under Medicaid; expense of last illness; debts and taxes under state law; bills; specific gifts under a will; beneficiaries under a will, or heirs, when there is no will.
•12. Termination: The estate does not terminate automatically. You may elect to close formally or informally. In informal closings, a closing affidavit form is filed with the court, indicating that the estate has been fully administered. This limits the time to one year when those who receive assets and creditors can challenge your administration and distribution of the estate.
In formal closings, the administration and proposed distribution of the estate is approved by the court and the personal representative is immediately discharged or released from liability by court order. A formal closing usually does not require an actual hearing before a judge.
You are liable to the beneficiaries for any loss to the estate and for any gain the estate should have realized but did not, if that loss cannot be shown to have been a reasonable risk, taking into account the term of the investment. Also, you are liable if you were negligent or intentionally did something you shouldn't (or failed to do something you should have done).
This information has been condensed from material published by the Colorado Bar Association.
Denver Real Estate information