Estate Administration is a process that involves a wide range of duties on behalf of the Executor or Administrator. These responsibilities include collecting, valuing, and protecting the estate’s assets, making payments to creditors and receiving collections from debtors, the payment of various taxes, and the distribution of the assets to the heirs and beneficiaries of the estate.
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The individual responsible for the administration of an estate is referred to either as an Executor or Administrator. The primary difference between an Executor and an Administrator is the manner in which they are appointed. Executors are named in the will of the decedent. If no valid will is left, or if the will fails to name an executor, an Administrator is appointed from the next of kin, often the surviving spouse or child. Regardless how the personal representative is appointed, he or she is still charged with the responsibility of handling the administration of the estate. Below is a brief overview of the different areas of estate administration that a personal representative should be familiar with.
Providing Notice to Creditors of the Death
As the Executor or Administrator, it is your responsibility to notify all potential creditors of the decedent. Frequently, a large amount of the estate is used to pay the outstanding debts left by the decedent, and the process of paying these debts consumes the majority of the personal representative’s responsibilities. The law requires that all of these debts be paid before any part of the estate can be dispersed to the family according to the decedent’s will.
Collected Debts Owed to the Decedent
The mirror image to the payment of the decedent’s debts is the collection of debts owed to the decedent. If an amount was to be paid to the decedent during his or her lifetime, it is the personal representative’s responsibility to collect these amounts, as they are considered part of the decedent’s estate. Thus, if the decedent loaned large amounts of money, it is the job of the personal representative to notify the debtors about the decedent’s death and demand they pay the amounts owed to the estate.
Making Arrangements for the Appraisal of Assets
Many items left in the decedent’s estate are easy to value, such as a bank account, stocks, bonds, and other types of securities. Others can be more difficult and need an appraisal to determine their true worth. These assets include real property, certain valuable personal property, such as jewelry and collectibles, and business interests. It is the personal representative’s responsibility to make the arrangement for such appraisals to be completed.
Distribution of the Decedent’s Estate
After all of the decedent’s assets have been located and valued, credits collected and debts paid, as well as taxes, the remainder is distributed to the beneficiaries of the estate. This is done either in accordance with the decedent’s will, if one exists, or according to the Rules of Intestacy. Once again, this is the job of the Executor or Administrator, and involves court oversight in order to ensure the decedent’s wishes are carried out as outlined in the will.
Preparation of Final Income Tax Return and Fiduciary Income Tax Returns
The personal representative is responsible for filing a final individual income tax return for the decedent, in addition to other estate tax returns. The personal representative may also be responsible for filing state and federal fiduciary income tax returns if the estate obtains a certain amount of taxable income.
Inheritance and Estate Tax Returns
For a decedent that lived in Pennsylvania, or owned property in the Commonwealth, and inheritance tax return must be filled out by the personal representative. Additionally, if the decedent’s estate exceeds the federal estate and gift tax exclusion amount, a federal estate tax return must be filed. Even if this amount is not exceeded, it may be useful to file the estate tax return as a surviving spouse may be able to add their spouse’s unused exclusion amount to his or her own.
The responsibilities assigned to a personal representative are numerous and often-times complicated. Additionally, the personal representative of an estate is a fiduciary, meaning they must act in accordance with the best interests of the estate. This is accompanied by an oath the personal representative must take
Michael J. Girardi
Estate Planning involves a combination of various legal instruments, such as Wills, Trusts, Powers of Attorney, and Living Wills, as well as Lifetime Transfers, Gifts, and Beneficiary Designations.