A Guide to Understanding Personal Representatives and Trustees

A Guide to Understanding Personal Representatives and Trustees - Part II

tienne • October 26, 2022

In part one of this series, we explored the basic terms related to fiduciary duties, and now we are ready to step deeper into what the role of Personal Representative or Trustee entails. What do these people actually do?

1. Read the estate plan

The deceased has named their Agent in one or more of the documents they signed while they were alive. Whether the deceased left a Will or a Living Trust, the estate plan documents will have further instructions as to how to proceed, so reading those and becoming familiar with their contents is an important first step.

Most people named to this position are not lawyers or financial planners. People usually appoint someone in their family who they trust to serve as their Agent.

So, many Personal Representatives and Trustees come into the position without any background that would help them read a legal document. If an Agent needs to hire professional help, they can do so. Many estate plans have specific provisions allowing the Trustee or Personal Representative to hire professional help and charge this cost to the estate. Getting a lawyer to explain the terms of the Will or Trust and assist throughout the process is one of the best ways to ensure an Agent’s duties are carried out in the most effective manner.

2. file appropriate paperwork with the county and notify relevant individuals

As the individual in charge of settling the deceased’s estate, the Agent will need verifiable proof of the person’s death, as well as proof of the right to act in their stead. This can be accomplished in some cases by presenting a Death Certificate and, if the deceased had a trust, a copy of the Certificate of Trust naming the Trustee. In other cases, the Agent will need to open a probate and attain Letters Testamentary to do business on behalf of the estate. Filing fees and other requirements may be necessary depending on the type of document.

Beyond government agencies and financial institutions, there may be a requirement to notify all natural heirs that the deceased has passed away. Even if a family member is not named in the Will, they may have the right to learn of this fact so they have the opportunity to contest the will or file other legal claims. This part of the process also involves notifying potential creditors, so that anyone with a reasonable claim to part of the deceased’s estate has the chance to come forward.

3. take control and manage all assets

All the deceased’s assets must be accounted for before the final distribution takes place. Maintaining an inventory of all transactions may seem unnecessary and painstaking work, but it is vital to ensure transparency and protect the Agent from claims in the future. Depending on the type of asset, the Personal Representative may need to renew licenses, pay a mortgage, or collect rents while administering the estate. The Personal Representative will also need to value the estate, possibly hiring a professional appraiser for valuable collections, jewelry, or unique assets.

If the deceased had a Trust, all outside assets need to be titled to that Trust before the Trustee can manage them (hopefully, this was already accomplished during the trustmaker’s lifetime). Administration of a Trust involves more than sim ply keeping the asset in good standing. A Trustee may need to invest principal to maximize income, or transfer assets from a liquid state into a long-term investment. As with reading and understanding the terms of the estate plan documents, professional advice is indispensable for someone without a financial background who finds themselves in this position.

4. pay debts, creditors, final bills, and taxes

An estate is considered settled when all debts have been paid, and all assets either sold or transferred to those who should receive them. If a Personal Representative fails to account for a creditor or an outstanding debt, they can be personally liable for that debt. Therefore, it’s vital that the Agent proceed carefully and follow all applicable laws and regulations concerning the payment of bills and debts.

5. Dispose of assets

Within the framework created by the decedent, it is the duty of the Personal Representative or the Trustee to decide what happens to each asset. For instance, a piece of property may be sold or rented out for ongoing income. A valuable piece of jewelry may be distributed to a family member or sold and the proceeds added to the residuary of the estate. The manner in which the Trustee and Personal Representative dispose of certain assets is usually at their personal discretion, as long as it is done in accordance with the terms of the Will or Trust. Best practices recommend having beneficiaries sign a document acknowledging receipt of their inheritance.

6. close the estate

An estate is considered settled when all debts have been paid, and all assets either sold or transferred to those who should receive them. Be aware that there are certain proofs and clearances that may be required by law before the Personal Representative or Trustee is entitled to declare publicly that they have completed their duties. Often, a Trustee will continue managing assets into the foreseeable future, but these will be assets that are held in a Trust, and not assets that are part of the deceased’s estate. In some cases, the estate remains open for a year after this point for any creditors or other potential beneficiaries to come forward. It is also wise to keep a reserve for payment of any future taxes which may come due within the year.

Please keep in mind this is a general list of duties, and should not be taken as an exhaustive list of instructions. You may also want to see the Colorado Bar Association’s pamphlets on the duties of Personal Representatives and Trustees .

Coming up next: Frequently Asked Questions (and answers!) in Part Three of our Guide to Understanding Personal Representatives and Trustees.

What next?

If you are serving as someone's Personal Representative or Trustee and have more questions or are struggling to make sense of your responsibilities, you can:

Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
Visit our estate administration page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
Learn more by reading our blog or watching our videos .

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Probate in Colorado: A Guide for Families and Executors

October 1, 2024

Dealing with the death of a loved one is never easy, and navigating the legal process that follows can add stress during an already difficult time. In Colorado, probate is the legal process by which a deceased person’s estate is administered, their debts are paid, and their assets are distributed to beneficiaries. Whether you’re an executor, beneficiary, or family member, understanding how probate works in Colorado can help you anticipate the steps involved and your potential responsibilities. This blog post will provide an overview of the probate process in Colorado, outline when probate is necessary, and offer guidance on how to navigate the system effectively. What is Probate? Probate is the legal process that occurs after someone dies to ensure their assets are distributed according to their will or, if there is no will, according to state law. The probate process includes validating the will, inventorying the deceased’s assets, paying off debts and taxes, and distributing the remaining assets to the rightful heirs. While probate is often associated with lengthy court proceedings, not all estates require formal probate. Colorado offers several options depending on the size and complexity of the estate, which can help simplify the process in many cases. When is Probate Necessary in Colorado? Probate is not always required in Colorado. Whether an estate must go through probate depends on the types and value of the deceased’s assets. Generally, probate is necessary if: The deceased owned real estate solely in their name. The deceased’s assets, such as bank accounts or investments, were not held in joint tenancy or designated to transfer on death. The deceased had personal property valued at over $74,000 (as of 2023). If an estate falls below this threshold and does not include real estate, the beneficiaries can often use a Small Estate Affidavit to claim the assets without going through probate. Types of Probate in Colorado Colorado has three main types of probate procedures: small estate procedures, informal probate, and formal probate. The type of probate required depends on the estate’s value and whether there are disputes among heirs or creditors. Small Estate Procedure (Collection by Affidavit) The small estate procedure can be used if the value of the deceased’s assets is less than $74,000 and does not include real estate. This process involves filling out a Small Estate Affidavit, which allows the heirs to collect and distribute the assets without opening a probate case in court. It is the simplest and fastest way to handle a small estate. Informal Probate Informal probate is used when there is a valid will and no disputes among heirs or creditors. The process is overseen by a court-appointed Personal Representative (executor), but there is minimal court supervision. Most of the process, such as distributing assets and paying debts, is handled by the Personal Representative, with only basic filings required with the court. Informal probate is less time-consuming and costly than formal probate. Formal Probate Formal probate is required when there are disputes regarding the will’s validity, disagreements among heirs, or if the estate is complex and needs court intervention. The process is supervised by the court, and all major decisions, such as approving the distribution of assets, must be approved by a judge. Formal probate can take much longer and involve more legal fees than informal probate. Steps in the Colorado Probate Process While the specific steps in probate can vary depending on the type of probate and the complexity of the estate, the general process in Colorado typically includes the following: Filing the Probate Petition The process begins with filing a Petition for Probate with the appropriate Colorado probate court. The petition is usually filed by the executor named in the will or an interested party if no will exists. Appointment of the Personal Representative The court will appoint a Personal Representative (executor) to manage the estate. If there is a valid will, the person named as executor is typically appointed. If no will exists, the court will appoint someone, usually a family member, to serve as the Personal Representative. Notice to Heirs and Creditors The Personal Representative must notify all potential heirs and creditors of the probate proceeding. This step is essential for providing an opportunity for interested parties to come forward and make claims against the estate. Inventory and Appraisal of Assets The Personal Representative must create an inventory of all the deceased’s assets and have them appraised if necessary. This inventory will include real estate, personal property, financial accounts, investments, and any other assets owned by the deceased. Paying Debts and Taxes Before distributing assets, the Personal Representative must pay off the deceased’s debts and any taxes owed. If the estate does not have enough assets to cover all debts, Colorado law dictates the order in which creditors are paid. Distribution of Assets Once all debts and taxes have been paid, the Personal Representative can distribute the remaining assets to the beneficiaries according to the will or, if no will exists, according to Colorado’s intestacy laws. Closing the Estate After all assets have been distributed and all required filings have been made with the court, the Personal Representative can file a Petition for Final Settlement to close the estate. Once approved, the Personal Representative’s responsibilities are complete. Challenges and Disputes in Colorado Probate Unfortunately, probate can sometimes become contentious, especially in cases involving high-value estates or when family members disagree on how assets should be distributed. Some common challenges in Colorado probate include: Will Contests Heirs or beneficiaries may challenge the validity of a will, claiming it was signed under duress, there was undue influence, or the deceased lacked the capacity to create the will. Will contests can significantly delay the probate process and require formal probate to resolve. Executor Misconduct If an executor is not fulfilling their duties or is mishandling estate assets, beneficiaries can file a complaint with the court and request the executor’s removal. Disputes Among Beneficiaries Disputes can arise over specific bequests, how assets are divided, or even the valuation of estate property. Mediation or formal court intervention may be necessary to resolve these disputes. How a Colorado Probate Attorney Can Help Navigating the probate process can be overwhelming, particularly when dealing with the emotional aftermath of losing a loved one. An experienced probate attorney can help in several ways: Guiding You Through the Process An attorney can explain the probate process, help you understand your rights and responsibilities, and ensure all legal requirements are met. Managing Court Filings and Deadlines Probate involves numerous legal documents and deadlines. An attorney can handle these tasks, ensuring that everything is filed correctly and on time. Resolving Disputes If disputes arise, an attorney can provide representation in negotiations, mediation, or court hearings to protect your interests and work toward a fair resolution. Minimizing Costs and Delays With the guidance of a skilled attorney, you can often minimize the time and expense associated with probate, helping ensure the process goes as smoothly as possible. How The McKenzie Law Firm, LLC Can Help At The McKenzie Law Firm, LLC, we understand the complexities of the probate process and are committed to helping families navigate it with compassion and expertise. Whether you’re an executor needing assistance with your duties or a family member looking to understand your rights, our experienced probate attorneys can provide the support you need. If you have questions about probate in Colorado or need legal assistance, contact us today to schedule a consultation. We are here to guide you through the process and ensure your loved one’s wishes are honored.