Being named Personal Representative in a loved one’s Will may seem like an honor when they are writing their Will and very much alive – however, after they pass, the reality hits you – What on earth have I gotten myself into?
Don’t worry! Virtually all of my clients are puzzled and a little intimidated by the position they have now found themselves in.
Below, I am sharing with you the letter I give to my clients who hire me to represent them as Personal Representative in the administration of the estate. I hope you find this letter contains not only an explanation of your duties but also some comfort that YOU CAN DO THIS and YOU ARE NOT ALONE!
Dear Client:
As personal representative of an estate in Florida, you should be aware of your duties and responsibilities under the law of Florida. We want you to also know what we will need from you so that we can assist you in your duties.
STARTING THE PROCESS
The process of probate or administration of the estate begins with my preparation and filing of a petition for administration, which you will sign as petitioner, the filing of a death certificate, the filing of the original will, and the filing of an oath, which you will not only sign but have notarized. Accordingly, you will need to send to me the original will, if there is one, and an original death certificate. I will email you the Petition and the Oath and you will be able to print them out, sign them, get the oath notarized, and email or fax them back to me. I will not need the original of these documents, as they will be filed electronically with the Court. Once I receive the letters of administration and the order appointing you as personal representative, I will email these documents to you. You will print these out so that you can use these in your duties.
Depending on the circumstances, the Judge may require a bond to be secured prior to issuing you the letters of administration. If this is the case, I will arrange for a bond to be issued; however, it will be an additional expense and usually runs from $250 to $1,000 depending on the size of the estate. The bond exists so that if you fail in your duties as Personal Representative, the bond is available to pay beneficiaries who have been harmed by your failure. Don’t be intimidated by this. Just because the Judge orders bond does not mean that anyone thinks you are incompetent or criminal. It is matter, sometimes, of whether the will requires a bond, or whether you live out of the state of Florida.
GENERAL DUTIES
It is the duty of the Personal Representative to gather the assets of the decedent, pay the bills of the decedent or at least notify them of the death of the decedent, notify the beneficiaries or heirs of the decedent that you are administering the estate, and finally to distribute the assets to the beneficiaries after a final accounting and distribution scheme of the estate has been approved by the Court.
Meanwhile, a useful first step is to redirect the deceased’s mail to your address using a change of address form at the post office. You will be gathering information regarding the deceased’s creditors and those who were paying money to the decedent. If there seem to be a large number of bills, I may ask you to agree to a credit check of the decedent so that we may be sure of the creditors. Please make copies of all bills and checks and send those copies to me for my files.
TAXPAYER IDENTIFICATION NUMBER
Probate Estates require a taxpayer identification number; therefore we can obtain one for you if you wish. You will use this number to open the estate account at the bank. In order for us to obtain a TIN (or sometimes called EIN) for you, we will need your social security number. Otherwise, you can obtain an EIN by going online to IRS.gov and locate ‘Apply for an EIN online’, then click Apply Online Now. Simply follow the online directions.
OPENING AN ESTATE BANK ACCOUNT
You will need to open a checking account in the name of the estate. You may also want to open a savings account depending on how much money is in the estate, or more than one checking account for different functions of the estate, but at least one checking account will be required. To do so, you will take the letters of administration, order appointing you as personal representative, and the Tax ID number to a bank. It is convenient to go to the bank where the decedent had an account, so that they may close out the decedent’s account and transfer the monies to the new estate account, but it is not necessary that it be the same bank. That is up to you. This account is the account into which you will deposit monies belonging to the estate and from which you will write checks to pay creditors and make distributions to the beneficiaries. This account will also be the basis of much of the accounting you will need to do at the end of the estate, which is discussed later.
ASSETS
For the period of the administration of the estate, you are entitled to possession and control of all of the assets of the estate. Your duty is first and foremost to protect and preserve the assets. Therefore, the next stage of administration involves identifying, collecting, inventorying, valuing, securing and investing the assets of the estate. Most custodians of assets will require that you produce Letters of Administration before allowing you to control or remove assets. Some will also require a death certificate. We will work with you to assist you in dealing with asset custodians who may have issues or questions regarding your authority.
If the decedent owned a vehicle, do not drive it. The estate could be liable for any damages caused by the driver; therefore, wait until the vehicle is transferred to the rightful heir before it is driven.
An important part of making certain that assets are secure is arranging for adequate insurance coverage for tangible personal property or improved real property. A list of all of the assets and their values must be filed with the court in the form of an inventory, and, if the estate is of a size sufficient to require the filing of an estate tax return, similar information must be provided for the state of Florida and for the Internal Revenue Service.
Throughout the estate proceeding, management of the assets is an important concern of the personal representative. Management of the assets includes an investment of the assets, whether in bank accounts, government bonds or other prudent forms of investment, to the extent that the estate has excess cash. A further and important consideration is liquidity management. The personal representative is required to sell assets or borrow money on behalf of the estate to meet the cash requirements as they arise if cash available to the estate is not otherwise sufficient. Cash requirements of the estate include the payment of creditors, payment of expenses of administration and the payment of taxes. Be sure to keep a record of all transactions and keep all bank statements. If the deceased had a primary residence in Florida, the Personal Representative may, but is not required to, take custody of the residence and secure it.
You may continue to receive government checks or pension checks after the date of death of the decedent. Do not assume that these are estate assets. You may need to return these funds to the payers. It may take several months for these payments to stop.
INVENTORY
As your attorney, I will work with you in preparing a formal inventory and preparing the necessary documents that need to be filed. Please provide statements from the source (i.e. bank institution) with the value of any accounts on the date of death to be included on the Inventory, within 45 days of your appointment as personal representative. The deadline for filing the Inventory is 60 days from your appointment as Personal Representative. You will need to get documentation from the source as to the date of death value along with the bank statement. We will prepare the Inventory for your signature upon receipt of the statements from you. While this sounds complicated, we will be working with you to help you obtain is information.
ACCOUNTING
One of the duties as Personal Representative is to keep track of all assets of the decedent and keep a record of all transactions pertaining to the estate account and the assets of the decedent. An accounting is required on all formal probate administrations unless it is waived by all interested persons. Therefore, keep all bank statements for the estate; proof of all accounts that were closed – showing the amount closed and ultimately transferred to the estate account; copies of all checks written from the estate account, and copies of all checks consisting of deposits made to the estate account. Keeping detailed records will make the preparation of the accounting efficient and keep the cost of preparing the accounting at a minimum. Having our firm track down missing statements, copies of checks, verifications of deposits and other missing information greatly increase the cost of preparation. You must keep receipts for all expenses. If you do not, you may be personally liable for expenses. It is strongly recommended all payments be made by check with an adequate description in the memo line.
CREDITORS
Almost every estate has creditors. For example, the power company and the telephone company are creditors to the extent that the bill incurred during the month of death was not paid (or even received) as of the date of death. Also, the funeral home is a creditor to the extent of services performed. There may be additional estate creditors. However, except for the funeral claim, claims are limited to amounts that were owed by (even though not yet billed to) the decedent as of the moment of death. It is easy to understand this by assuming what the decedent would have paid if death had not intervened. Debts that are incurred after death in connection with the estate administration are not included in this category and are handled in another manner.
One very important duty that the law requires of you is to determine the name and the address of each creditor in existence as of the moment of death. By simply having the mail forwarded, you should receive all the bills. But, many times there are creditors who do not send bills. You must make a “diligent search” of all available sources to determine the creditors. One resource to determine creditors is the decedent’s bank account. Note who the decedent was writing checks to. We will consider these creditors even if the decedent was keeping current on his/her payments.
Once the name and address of the creditors are determined, you are required to notify the creditors of the requirement of filing a claim. This is accomplished by sending a copy of the Notice to Creditors to each creditor. When you receive a bill, forward it to us or make a detailed list of the bills with account numbers, addresses, phone numbers, so we can send a copy of the Notice to Creditors to the creditor. If you send the bill to us, you may want to keep a copy of the bill for your records. When you furnish us with the list or copy of the bill, we will see to this notification on your behalf. It is, however, your responsibility to make a diligent search to determine a complete list of creditors and to furnish us with that list or send us a copy of the bill.
You must accomplish this promptly because the legal notification must be sent to the creditors and we must publish a general notice of creditors in a local paper. Receipt of this notice by the potential creditor (with some minor exceptions) allows them only 30 days (90 days for those relying on publication) in which to file the claim or be barred by law from collecting the amount from the estate. If we fail to send the notice to the creditors within the time allowed, this will have the result of extending the time in which they may file their claims against the estate. It is in the best interests of all who are interested in the estate that we end the creditor’s filing period as soon as legally allowed.
We are also required to prepare a statement under oath for your signature that you have conducted such a diligent search, and entered on the statement will be the result of that search.
INCOME TAXES
As Personal Representative, you may be required to file tax returns and pay taxes for the estate. There may be many required tax returns; however, the most common are income tax returns for the decedent, which may not have been previously filed and income tax returns for the estate if the estate will likely have income in excess of $600 during its tax year. You will need to hire an accountant or tax preparer to handle the final income tax return of the deceased prior to death and to prepare income tax returns for the estate. We do not typically prepare income tax returns.
ESTATE TAXES
For estates where the total taxable value exceeds $5,340,000, an estate tax return will need to be filed. Otherwise, an affidavit of no tax due must be filed. If an estate tax return is required, we will refer you to an accountant or tax attorney, depending on the complexity of the return.
DISTRIBUTION OF THE ESTATE
After expenses, including taxes, have been paid, the next stage of the administration is the procedure involving the distribution of the estate to the beneficiaries. As your attorney, I will review the applicable dispositive direction and will advise you of the provisions of the law that apply in order to identify the persons who are properly beneficiaries of the estate and who are entitled to distribution. You will then calculate the distributive shares after the deduction of any taxes attributable to each share.
Distribution of the assets of the estate then occurs to the persons entitled, sometimes by distributing the assets directly in satisfaction of a bequest, and other times by selling those assets and converting them to cash, and then distributing the cash.
CLOSING THE ESTATE
The final stage of the estate is closing out the probate. In this procedure, the court enters its order discharging you as personal representative after your duties have been completed. In order to accomplish the estate closing, it is necessary to report to the court on all legally significant activities which occurred in the estate and to furnish evidence that the creditors have been paid and that certain taxes have been paid, and that the remaining property has been distributed to the persons entitled to that property in proper shares. When this evidence has been presented in proper form, which is again my legal responsibility, the Judge will sign an order which discharges you as personal representative and terminates your obligations with regard to the probate. The final stage of this procedure is that it is your responsibility for the filing of any final income tax return that the estate is obligated to file for the year in which the final settlement occurs. It should be remembered when the estate is closed that the estate may have had taxable income for that year or otherwise be responsible for the payment of taxes, and sufficient funds must be retained by you in order to enable you to pay those taxes that might be due.
It is difficult to predict with precision how long it will take to probate this estate. Many factors impact the answer. By state statute, a Florida probate estate must be closed within twelve months after it is opened unless the Judge grants special permission for an extension of time. Extensions are only granted for good reason. Good reasons to extend the time include such things as pending litigation by or against the estate, liquidation of assets for distribution, disputes with taxing authorities and similar matters either out of the personal representative’s control or that would work a disadvantage upon the estate if time were not extended.
FIDUCIARY RESPONSIBILITIES
In Florida, a personal representative is classified under the law as a “fiduciary.” A fiduciary is a person who has been selected for a position of special faith, trust, and reliance. A “trustee” is another type of fiduciary and the duties and responsibilities which you have in the settlement of this estate are quite similar to the duties and responsibilities that a trustee would have.
As personal representative of the estate, in accepting that office and that trust, you also agreed to be personally responsible financially for certain matters. Initially, of course, you have personal responsibility for proper administration, investment, and subsequent distribution of the assets of the estate. As I pointed out earlier, should you fail in this duty you may be sued by any person who has been injured by your failure. More important, however, is the certain hidden liability which you have assumed, and of which you should be aware, for the payment of various taxes that were owed by the decedent or that may subsequently be owed by the estate. Upon the failure to pay these required taxes, the law permits the Internal Revenue Service, and in some situations, the State of Florida, to collect the taxes from your own assets. Those would include the right to freeze your personal bank account or place liens on real estate or other property that may belong to you personally. This, of course, occurs only if you fail to pay taxes from the estate that are required to be paid by you in your capacity as a personal representative.
The persons to whom you owe these duties are, first, any creditors of the estate, and second, the beneficiaries of the estate. If your duties are not properly or competently performed, you may have to answer to any of these persons who have been harmed as a result.
You will be furnished with copies of the papers you sign so that you may create a file of your own. Most clients find it useful to set up a file at the beginning for the estate and to keep all the papers in one location.
WE ARE HERE FOR YOU
I know it can seem like an overwhelming amount of information and responsibilities, but remember, we are here for you. Call us with your questions and concerns. There are no stupid questions. We represent you and we want to help you all we can.
Sincerely,
Anne E. Moore
