Common Pitfalls of Probate

by | Jun 5, 2024

If you have been appointed as a personal representative in a probate proceeding, either through a will or by the court, you may feel overwhelmed by the logistical tasks ahead. Allow us at Axis Law Group to ease your burden by highlighting common mistakes personal representatives make when they forgo legal advice.

Estate Account

Part of the job for a personal representative is handling the decedent’s finances. This means paying inspectors to examine property, contractors to make updates, accountants to file taxes, realtors to sell a home or land, creditors for debts, and beneficiaries their inheritance.

Paying these parties out of your own account and reimbursing yourself later may seem natural, but comingling estate assets with your own assets creates a conflict of interest. The personal representative is required to open a separate estate account to hold the decedent’s funds. Once this is completed, you can use the estate account to pay for services related to the estate. This practice helps avoid confusion about which money was used for what and prevents questions of self-dealing.

Accounting and Inventory

The need for an estate account naturally leads to the importance of maintaining accurate accounting and inventory lists for the estate. An accounting and inventory list function similarly. For an accounting, you, as the personal representative, will track the money that flows in and out of the estate. Concerning inventory, you should note whether real estate is sold or kept, the value of stocks and investment accounts, the amount of cash or debts, and if any vehicles have been sold. Keeping a detailed ledger allows you to avoid accusations of mismanagement by beneficiaries.

Receipt and Release

A personal representative has a duty to distribute funds to beneficiaries. As a part of this distribution, you should always have the beneficiaries sign a receipt and release. This document confirms that the beneficiary received their funds and releases the estate and personal representative from future liability. Such a form functions to shield both the estate and the personal representative from potential lawsuits.

Date of Death Appraisal

If the estate has land or a house that was owned by the decedent, then it is prudent to get a date of death appraisal. This appraisal values the property at the time of death, helping you make informed decisions in the best interest of the beneficiaries, such as whether to keep or sell the home. Additionally, the date of death appraisal is most important when it comes to filing taxes. The CPA will need to see the date of death appraisal to determine if additional taxes need to be paid on behalf of the estate. Therefore, a date of death appraisal is crucial for fulfilling your responsibilities as a personal representative.

Filing Estate Taxes and Schedule K-1

An important responsibility of a personal representative is ensuring the estate files taxes annually and upon the completion of administration. The estate may need to file both federal and state income tax returns if it generates income during the probate process. It is important to meet with a tax professional to ensure you are following all tax guidelines.

If you expect to be appointed as a personal representative, avoid making these common mistakes. Consult with an experienced probate attorney at Axis Law Group today to guide you through the intricacies of probate law without missing a step.