Serving As Personal Representative? Make Sure You Know The Role
So, despite how much we hate talking about it, folks, we need to have that chat.
You see, any qualified retirement specialist will always build a system around an income, tax, and investment plan in order to give his or her client the highest probability of financial success. However, another important piece of a retirement system, one that is often overlooked, is an estate plan. And an estate plan usually involves the creation of a will, and the decision of who to name as personal representative.
Being asked to act as personal representative for someone has an element of honor to itthat they trust and respect you enough to carry out their final (many times, most important) wishes. But with that honor comes responsibilities. Its a job that requires work before the person dies and carries on months and sometimes even years past their death.
So, I thought it would be good for us to talk this week about some responsibilities of being a personal representative.
Prior to the testators death (the testator is the person who creates the will), the first thing a personal representative should do is ask where the will is kept and make sure he or she has access to it. Its awfully hard to execute a plan if you cant find the plans directions. Ideally, a personal representative should also review the will and the testators intentions while the testator is alive and healthy. It is always smart to ask whether the testator used an attorney. And if so, to ask for the attorneys contact information. We always suggest using a qualified estate planning attorney. I reached out to attorney Suzanne Glynn, partner at law firm that works as an estate planning attorney, for her input.
It is always a good idea to have a signed receipt that lists the clients documents, where the original documents will be stored and to make sure that the designated personal representative knows where to find such receipt. In many cases the original documents will be stored in a safe deposit box or a fireproof home safe. The personal representative should know where the safe deposit key is stored or, have access to the safes combination. If, however, the original will is lost or misplaced, in certain cases it may be possible to file a copy of the Last Will with the local Probate Court and request the allowance of the copy of the will.
I find that an equally important consideration, in todays digital age, is to decide who you will entrust your online passwords to, in order to access online bank and investment accounts. Further, who will be your legacy contact, or the person who will have access to your various online social media accounts, so they can take the necessary steps to preserve or close such accounts. If you have an online storage or backup service, which is encrypted, without the encryption key, it can be difficult to access such data after death, she stated. Suzanne, thanks for the great advice and just another reason why you want your retirement specialist working closely with your estate attorney.
Now, if one of the individuals planning goals is to minimize probate administration, there are several simple planning techniques that can be employed, before death, to avoid probate. Any benefit payable under a contract, such as an insurance contract, retirement plan or IRA, will be payable to the beneficiary designated under the contract. Folks, this is important because if no beneficiary is designated, it will be payable to the estate and probate administration will be necessary. We want to try to avoid probate, if possible, so it is important to check the beneficiary designations under such contracts as a part of the estate planning process.
Any property held in joint name with another, passes to the surviving joint owner. In general, an individual may designate a beneficiary under a bank, brokerage, stock account or mutual fund. Such designation is called a transfer on death, or TOD beneficiary designation and it is important to name a beneficiary (other than the estate), if the goal is to avoid probate administration. It is important to note that many individuals employ a revocable trust as a part of the estate plan as a tool to minimize probate administration.
I asked Suzanne for her thoughts regarding post death. She said, Post death, if there is property owned by the decedent in his or her individual name, it will be necessary to file a petition seeking allowance of the decedents will and administration of the estate. The will is filed along with such petition. If there is no need for probate administration, preset local practice is for the personal representative to retain the will for safekeeping in the event probate ever becomes necessary. The will, provides the instructions for the payment of any debts, taxes and the costs incurred in the administration of the estate. It also provides the instructions for the division and distribution of the decedents property among the beneficiaries. Good point.
Another important duty of the personal representative is to gather the decedents holdings and prepare a list of such holdings (the inventory). In certain cases, it will be necessary to file such inventory with the probate court. The inventory will list the decedents holdings, and the date of death value of such holdings. Once completed, the personal representative can determine the next steps in the administration process.
As soon as possible, the personal representative also must notify all necessary parties of the decedents death. This does not just mean a call to their loved ones expressing condolences. Remember, a personal representative has a job to do. Notification involves contacting the banks, credit card companies, social security offices, life insurance companies, et cetera.
It is also the personal representatives responsibility to ensure that the estates bills, such as for utilities or mortgages, or any regular payments that dont stop with the testators death, continue to be paid. Oftentimes, this is done by setting up a separate bank account in the name of the estate to pay those bills. The estate bank account will also be collecting any incoming payments or paychecks.
Unfortunately, death and taxes are two of lifes guarantees, and one doesnt stop the other from occurring. After death, creditors may file claims against the estate and if properly filed, such claims must be paid. In addition, certain tax returns must be filed on behalf of the decedent and the estate, so be aware of and be prepared to pay any of taxes that might be necessary.
Suzanne further notes that, the personal representatives duties also include filing a decedents final individual income tax return, filing any income tax returns required to be filed on behalf of the estate, and if the estate exceeds the state estate tax exemption amount, filing an estate tax return. In general, if it is necessary to file a state estate tax return, the personal representative will want to wait until such return has been reviewed and accepted by the tax authorities before making the final distributions to the beneficiaries of the estate. In addition, the personal representative should wait until the one year claim period for a creditor to file a claim against the estate has expired. If the personal representative makes final distributions to beneficiaries before such time, he or she may be personally responsible for such payments.
It is only after all of these steps, and after representing the decedents estate in court if necessary, does the personal representative get the most commonly known responsibility of distributing the assets. This can often be as simple as following the instructions included in the will, or following any state laws, if the decedent died without a valid will.
Folks, being a personal representative is an honor, yes, but as discussed, with that honor comes great responsibility, often at a time when one would rather be grieving, or spending time with family, rather than dealing with banks and lawyers and everything else that comes with estate management. If you are asked to be someones personal representative, make sure you are prepared, and your loved ones are prepared for the role you will need to step into during an already difficult time.