Definition of Personal Representative
A Personal Representative is named in the Will, and acts as the executor or administrator of the estate of a deceased person. Personal Representatives serve as fiduciaries of the beneficiaries of estates and have the duty to act in good faith, with honesty, loyalty, and candor, and in the best interests of the estate’s beneficiaries.
The law requires personal representatives to follow the terms of the deceased person’s Will (assuming that the individual who died had a Will). If the deceased person died intestate (without a Will), the Personal Representative will serve as the administrator of the intestate estate.
An individual with the authority to make decisions over others is also a Personal Representative. For instance, the person authorized to make healthcare-related decisions for another person because the latter is very ill or not lucid is a Personal Representative. In that example, the Personal Representative has Power of Attorney, a legal document that allows the representative to act for the other person when making legal or financial decisions.
How a Personal Representative Works
A Personal Representative typically performs a number of tasks when acting as the executor of a deceased person’s estate, including:
- Locating your assets;
- Getting date-of-death values;
- Notifying your creditors;
- Preparing and filing tax returns;
- Paying ongoing expenses; and
- Distributing the balance of your estate.
In most cases, a Personal Representative is a close friend or relative of the deceased. Given the significant amount of work involved, a Personal Representative can receive compensation from the estate. However, not all work must be performed by the Personal Representative themselves. For example, if the Personal Representative is working closely with lawyers and tax professionals, the Personal Representative merely ensures all the tasks related to the estate are handled properly and in a timely manner.
Locating Your Assets
Your Personal Representative must locate and safeguard your probate assets – those that have no way of transferring to a living individual other than through the probate process. Life insurance and certain retirement accounts with beneficiary designations pass directly to beneficiaries by operation of law, so they wouldn’t be included among your probate assets.
Getting Date-of-Death Values
Establishing date-of-death values for your probate assets include ordering appraisals of real estate, business interests, or collectibles – anything that might be of disputable value. Your Personal Representative must obtain values for non-probate assets as well if it appears that your estate will owe estate taxes, because both are included in your taxable estate.
Why Values Matter: The Estate Tax
Your gross taxable estate is the total of all you own: both probate assets and property that passes directly to a living beneficiary. The estate tax exemption is subtracted from this total value and the tax is due on the balance.
NOTE: Only estates with values of more than $11.7 million (double that, $23.4 million for married couples) are subject to the federal estate tax on the balance over this amount as of 2021. Colorado does not impose a state estate tax. The federal exemption is indexed for inflation, so it can increase annually. Alternatively, it can also be decreased depending upon national politics.
Notifying Your Creditors
Your Personal Representative must identify your creditors and pay off your outstanding debts. This typically includes running newspaper notices to alert all companies and individuals to whom you might owe money that you have died. They can then make claims to the estate for what they’re owed.
Your Personal Representative should also send written notice directly to all creditors that they can readily identify and locate.
Preparing and Filing Tax Returns
This will include your final personal income tax returns for the last year of your life, both federal and state. Your Personal Representative will also prepare the estate tax returns if your estate is significantly large or if your state imposes estate taxes.
Paying Ongoing Expenses
Your Personal Representative must also pay the ongoing expenses of administering your estate. This can include:
- Court fees;
- Appraisal fees; and
- Compensation to the Executor, Attorneys, or Accountants.
These operating expenses must be paid before probate closes and property can be legally transferred to beneficiaries. This might require that your personal representative sell or liquidate assets to raise the necessary cash.
Distributing the Balance of Your Estate
Finally, your Personal Representative will distribute the balance of your estate to your beneficiaries. This typically requires filing one or more documents with the probate court first, including:
- A list of the estate’s probate assets and their values; and
- An accounting of all debts, taxes, and expenses paid.
If the estate is in probate, court approval is necessary for distribution of assets.
Who CAN’T be a Personal Representative?
There are certain criteria that Personal Representatives must meet in order to serve in this role.
- Minors cannot serve as Personal Representatives;
- Convicted felons typically cannot serve as Personal Representatives;
- Banks or trust companies that do not have fiduciary powers in the state where probate is taking place are also barred from serving as Personal Representatives.
I Need to be Appointed as Personal Representative: Can you Help?
Our empathetic attorneys are happy to set up a time to chat with you about the process to get appointed as Personal Representative, what to expect throughout the Probate process, and timelines to finalize all of the necessary steps. Please give us a call at 719-259-4971, or you can book a free time to meet using our calendar.