Many people do not realize the work and complexity that can be involved in being a Personal Representative of an Estate. The person making out the Will usually chooses a spouse, another close relative or friend, their attorney, or a bank. Personal Representatives, as fiduciaries, must observe a strict standard of care in carrying out their duties and protecting Estate assets. Here is a partial list of these duties.
1. Get the Will probated. This usually involves having a lawyer petition the Court to approve the Will and have the Personal Representative appointed. Once this step has been completed, the Personal Representative is empowered to administer the Estate, which might include any of the rest of the items in this list, depending on the size of the Estate.
NOTE: The Massachusetts courts don’t necessarily have to accept you as the personal representative just because you were nominated in the will, but even before that process has started, you are allowed to carry out certain written instructions left by the decedent, especially when it comes to the body and funeral arrangements. You may also want to get a start on gathering and protecting assets while working to locate the decedent’s original will (often kept in the home, safe deposit box, or with the wills and trusts attorney).
There will be other documents to track down, as well such as funeral plans, wills and trusts, pre-nuptial agreements, insurance policies, retirement fund statements, bankruptcy papers, unpaid bills, and so much more.
2. Pay the bills of the estate while it is being processed.
3. Collect or "marshal" the assets, so that they can be distributed according to the terms of the Will. Finding assets often can be a challenge. The Personal Representative must find all car registrations, stock certificates or account statements, mortgage papers, deeds pension benefit papers, and IRA and savings account papers, to name a few. (Could you easily find these for yourself?)
4. Make sure the assets are valued Valuations may be necessary for Estate tax purposes for larger estates. Under the tax law, the heirs inherit the assets at a tax basis that is equal to the value at the date of death. This "stepped-up basis" can be a valuable tax benefit, so the Personal Representative must have the assets valued and keep a record of the values.
Example: Your niece inherits 1,000 shares of stock from you. You only paid $20 per share, but the stock is now worth $100 a share. As you can see, you’d have a capital gains tax based upon the difference of the sales price of $100,000 less your purchase price of $20,000 if you sold that stock. But when your niece inherits it, she’ll get a "stepped-up basis" - the date-of-death value of the stock ($100 per share); if the price goes up after your death and she sells it she will pay less capital gains tax than you would have paid. If she sells it for the $100 per share dated-of-death value she will pay $0 capital gains tax.
Assets that are not readily valued, such as business interests, real estate, art collections, should be appraised.
5. File the necessary tax returns, federal and state, and pay the taxes. Taxes would include federal Estate tax and state Estate tax, and any Income taxes, Federal and State, the Estate and/or the decedent might owe. Larger, more complex Estates usually must file all three of these.
The general rule is that if the taxable Estate is greater than the Estate tax limit ($5.43 million Dollars, in the year 2015), a federal Estate tax return must be filed. In Massachusetts an Estate tax return must be filed for Estates valued at over 1 million dollars. The valuation of assets discussed above is needed for the federal Estate tax and MA Estate taxes. Federal and Massachusetts Estate taxes are due and payable nine (9) months from the date of death.
The Personal Representative must also file the decedent’s final Income tax return, federal and state, and make any necessary tax-related elections by the applicable April 15, Income tax filing deadline. Additionally, the Estate, as a separate entity, may also need to file Income tax returns if the Estate earnings exceed a certain limit.
6. Cancel credit card and other accounts, and inform various personal of the death.
7. Make an inventory and accounting of the Estate’s assets (this often necessitates professional help).
8. Determine and pay the Estate debts.
9. Distribute and/or transfer the Estate’s assets in accordance with the Will or to heirs if there is no Will. (Note that usually Probate Court suggest you wait a year to distribute any funds incase there is any liens or outstanding balances that come about that you are unaware of, anyone can make a claim on to the estate in a year period. After the year is up they can not make any claims as the estate can be closed and if a Personal Representative distributes funds before the year period is up and there is a claim against the Estate they will be responsible to pay the claim out of their own funds.
10. Close the estate when everything is ready. Your Attorney will be able to do this by filing a Final Accounting and Petition for Decree of Complete Settlement once a year period is up and all has been distributed.
The Personal Representative may also need to sell and/or manage the Estate assets. Of course, the amount of work involved will depend on the size and complexity of the Estate and its assets. In most cases assets will be liquidated before distribution. If you are appointed Personal Representative, the assistance of suitable professionals, such as appraisers, accountants, attorneys, real estate brokers, etc. can make your job more manageable.
Please note that in Probate of a decedent who did not have a Will the Personal Representative’s duties are the same as set forth above.