(I posted an article on this topic a few years ago. That article is still good information, but I wanted to revisit the topic and expand on it some. This list is not exhaustive, and each case is unique, but it should cover some major points.)
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You've been nominated as Personal Representative (formerly called "executor") for someone's estate, and now that individual has recently passed away. There is so much to do, where do you start? The job may seem daunting, especially when dealing with loss. You have your own life, your family, your career. Acting as PR can take a lot of time and commitment. But it doesn't have to be insurmountable. Let's break it down.
I. The Personal Representative has three major duties.
- Collect assets and ensure that those assets are protected,
- Pay valid debts of the estate, and
- Distribute any remaining assets (specific gifts and residue) to the beneficiaries.
II. You represent the interests of the estate.
The PR is a fiduciary (agent) of the estate, and not an agent of the beneficiaries. The estate is a legal entity with legal rights, just like a person or a corporation. Even though the beneficiaries may ultimately inherit assets from it, until the probate is closed and everything is wrapped up, the estate remains a separate and distinct legal entity from those beneficiaries. That means your duty of responsibility is solely to the estate. If the needs and wants of any of the beneficiaries (or anyone else) ever becomes at odds with the interests of the estate or your duties, always understand that the estate is your "client" and you must act on its behalf.
As the estate's fiduciary, you have standing to sue any party on behalf of the estate--that includes beneficiaries! Hopefully, it won't come to that.
Note that at this stage, you are merely the Personal Representative nominee, having been nominated in the Will. You do not officially become the PR until the probate court appoints you as such. This is done by the court issuing what is called Letters Testamentary. Due to privacy concerns, many entities, such as financial institutions, may not be able to do anything until you have provided them a copy of the Letters Testamentary proving to them that you have been appointed by the court.
III. Seek the advice of a competent attorney.
There are some exceptions, but many estates need to be probated. This can be a daunting process, and it would be prudent to seek the guidance of a probate law attorney. Even if probate is not needed, it's wise to check with an attorney as soon as possible. Legal fees for this can be billed to the estate, and it's money well spent.
IV. Collecting and protecting assets of the estate.
One of the first tasks is to gather documents left by the decedent. You should have the original, signed Will in your possession. If the estate must go to probate, the court will need you to submit the original document. If you find more than one Will, keep them together, as the court will need to determine which one governs. Also look for any lists of personal items to distribute.
You are not obligated to disclose the contents of the Will with any beneficiaries or other persons at this time. Doing so could lead to conflicts, especially if you are also a named beneficiary, and you don't need conflict now. Keep that information close to the vest and let family members deal with their grief. There will come a time for you to "read the Will" to the family a little later on.
Collect all financial, medical, and other relevant documents, and do this as soon as possible. If those have been kept in a locked file cabinet or safe, have someone provide access to it. Along with the Will, keep these documents in a secure location where others cannot access them. After someone dies, it's not unusual for people to come and go in the house to pay respects or deliver things. Don't let important items get lost in the shuffle. It is preferable to remove those documents from the premises as soon as possible and keep them in a secure location of your own.
Locate and secure valuables, such as jewelry, cash, firearms, antiques, coin collections, etc. This includes any electronic devices that might hold data, such as computers, smartphones, tablets, etc. Limit access to the home. If that means changing the locks and keeping out family members, so be it. Don't take the risk of someone independently helping themselves to things. You are responsible for the security of estate property. Make it clear to everyone that there are legal remedies available to you if someone absconds with estate assets.
There may be online information you will need to obtain. Under RUFADAA, as PR, you have right to access certain digital assets of the decedent--if the decedent gave authorization in the Will. You can also check with family members to obtain logins to accounts.
Are there outstanding debts owed the decedent, like IOUs or promissory notes? Did the decedent loan money or property to someone? Unless there is some written agreement discharging debts on death, those debts are now owed to the estate. Locate the documentation for these, and contact the debtors to collect.
If the decedent owned a business, you will need to determine what succession plan must be followed. Are there co-owners? How will control of this business be passed on? This may require the help of a business law attorney.
When you contact companies, you may discover some assets you previously weren't aware of. Be sure to ask if there are balances due, or refunds. If there is a refund due, such as an unused portion of an insurance premium or a credit, be sure to obtain that. You have a duty to maximize the estate assets.
Some instruments in the estate are non-probate assets, such as pension funds, investments, life insurance policies, and assets with a payable-on-death provision. These are paid directly to the named beneficiaries and are not subject to probate. You still may need to contact those firms to give notice of the principal's death and help coordinate the payout process. The fact those are non-probate assets does not automatically protect them from debts for medical assistance. Many assets are reachable in MA claims. The same is true with debts to the IRS and state/local taxing authorities.
If there are salable items in the household that can be converted to cash, it may be worthwhile to hold an estate sale or a garage sale. Certain valuables, such as jewelry, firearms, artwork, motor vehicles, etc., may need appraisal. All funds recovered from this (minus any auction or consignment fees) are estate assets and must be deposited into the estate account.
V. Gathering information concerning potential estate debts.
Few people die with zero debt. You will no doubt be sifting through what seems like mountains of financial documents. Many of those will be bills. You may not know which--if any--have been paid. Develop a plan and start organizing bills and statements for the different creditors. Don't assume something is settled--contact each creditor to give them notice of death and to see if there is an outstanding balance.
You will need to publish a notice to creditors in the legal section of the local newspaper, once a week for two successive weeks. Creditors have 4 months from the date of the first publication to make claims against the estate.
You will be making phone calls. Lots of phone calls. The list of places to call may include Social Security, Medicare/Medicaid, state social services, VA, mortgage lender, landlord, IRS and Minnesota Department of Revenue, medical providers, funeral home, insurance companies, banks, investment agents, utilities, phone and internet, credit card companies, HOAs, clubs, subscriptions, etc. Your calls to them will put them on notice of the testator's death, and help you make a tally of what debt obligations may exist.
Once the court has officially appointed you as PR, you should set up a checking account in the name of the estate. Prior to doing that, you should file IRS Form SS-4 to obtain a new tax ID (EIN) for the estate. The bank will need that EIN, along with your Letters Testamentary and copy of the death certificate. You will need to fund the account with the estate's cash assets in order to pay debts. The estate EIN will be needed for tax preparation later.
VI. Paying valid debts.
Once you have determined the estate assets, and have a list of creditors to pay, you may begin paying debts from the estate account. Minnesota law states a list of priority for the paying of estate debts. This Classification of Claims can serve as a guideline for you to determine who gets paid first. If the sum of the estate assets is less than the sum of the valid debts (insolvent estate), you pay the high priority debts first and work your way down until estate assets are exhausted. The remaining creditors may then be out of luck. The beneficiaries will be out of luck, too, as valid debts take priority over their inheritances.
As PR you are not personally liable for estate debts, as long as you act in good faith.
You may have to file personal income tax returns for the decedent next tax season, and it would be wise to keep some money in the estate account for preparation fees and any tax liabilities. If the estate is large, there may be estate taxes due.
Be aware that some debts may incur late fees and penalties over time. Paying these on a timely basis can limit those extra expenses. Again, your job is to maximize estate assets.
VII. Your expenses.
You are entitled to reimbursement from the estate for out-of-pocket expenses incurred during your representation. In addition, you may be eligible for reasonable compensation for your time spent performing your duties. You also may need to hire the services of professionals: appraisers, tax advisors, attorneys, etc. The expenses of those services may be billable against the estate.
VIII. Distributing the remainder to beneficiaries.
After all valid debts are paid, you have submitted an accounting to the probate court, and the court is satisfied that all elements of probate have been completed, it will officially close the probate. This may not happen until a year or more after the testator has died. Your next task is to distribute any remaining assets to the named beneficiaries, per the instructions in the Will. There are two classifications for these: specific gifts and the residue.
Any specific gifts that are provided for in the Will are distributed first and they take priority over the residual shares. Thus, if there is a provision for property or a cash amount to be paid to a named beneficiary, that must be conveyed directly to that beneficiary.
After specific gifts (if any) are distributed, the remainder (residue) is distributed to the named beneficiaries, based on the proportions stated in the Will.
Note that it is generally OK for the PR to allow family members to take some keepsakes or family heirlooms prior to distribution of the rest of the estate. Use good judgment in granting this. A valuable coin collection or the car out in the garage is not likely a "keepsake" for the taking. Any major item that can be converted to cash should be held to sell for estate funds. Remember, the probate court will expect an accounting of big-ticket assets. However, some household items, family photos, etc., are generally OK to distribute right away. If there is a separate list of personal items referenced in the Will, these items can generally be distributed before probate is closed.
Do not give advances in estate funds to beneficiaries prior to closing of probate, unless there is some trust provision that requires it. What if a creditor or bill pops up later and you need that money to pay it? If you distribute money to someone and there's not enough remaining funds to pay a valid debt, you will need to claw back money from those beneficiaries. Remember, you have standing to sue on behalf of the estate. Keeping a tight rein on estate funds will help prevent such an awkward encounter.
IX. Other "non-PR" tasks you may need to do anyway.
There are some "loose ends" tasks that need to be done after someone dies. Some of those tasks may fall on your shoulders if no one else steps up to do them.
- Disposal of unwanted household goods, items that may not bring in cash to the estate. You may need to haul some stuff to a donation center, other items may need to be tossed or recycled. If there is a large quantity of items to dispose of, you may need to rent a rollaway dumpster.
- Cleaning/prepping the house. Someone will need to prepare the house for sale; or if it's rental property, get the premises clean and obtain the deposit refund from the landlord (another estate asset).
- Some items may need to be stored, perhaps in a storage locker. Encourage those recipients to remove those items before a storage rental is necessary, or insist that they pay to have them stored.
- Are there pets left behind? You may need to care for those, and/or find new homes for them. Check to see if the Will has a provision for caring for pets.
- You will likely receive plenty of the decedent's mail that, by now, you have had forwarded by USPS. You will need to sort through that and respond to the items that need attention.
- Sending thank you cards to people who gave gifts or memorials at the funeral.
- If the decedent's remains were buried, check to see if a headstone is being made and that payment is made from the estate for that.
It might be prudent for you to delegate some of these tasks if you become overwhelmed with work with the estate.
X. If the estate is a hot mess.
Some estates are left with an enormous amount of loose ends and touchy issues to be addressed. There may be a huge load of debt. There may be conflict flaring up among family members, some which may be directed at you. There may even be someone who contests the Will or threatens to do so. Keep a level head and persevere. You are the estate's agent and the testator trusted you to carry out this job. Seek the help of an attorney, especially if someone threatens to contest the Will.
If the Will has named another person to step in as a co-fiduciary, ask them for help. You can delegate some of the legwork that needs to be done.
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Being a Personal Representative is often a tedious, thankless job, but one that can be rewarding in the end. You can do this!
