How Often Should An Executor Communicate With Beneficiaries

dan • Feb 12, 2023

Transcript

Hey everyone, Dan McKenzie here with The McKenzie Law Firm. We are an estate planning, estate administration, and small business counsel law firm in the Denver, Colorado area. And I wanted to make a video about a very common question we get about estate administrations. That means probates and sometimes trust administrations. And that question is: how often should the person who is administering the estate communicate with the estates beneficiaries? So the person who is administering the estate, that could be the executor, the personal representative in a probate process or the trustee of a trust. And I just thought I'd go through a few things here. You know, we always start on questions like this with the statute and what does it require?

So I'm in Colorado. Your state certainly has a probate code too. If you Google your state's name followed by probate code, you'll probably find it, and it'll be something similar to this. Colorado uses what's called the Uniform Probate Code, which is it's uniform. So some states have adopted that, quite a few actually. And so you might also be in a state that has a very similar statute to this one. But that should be really your first point of reference when you're trying to figure out what you need to do. And so if we go here, I'm looking at the Colorado probate code .

You can see that there are a number of provisions here dividing things up and explaining the duties. And down here is a " Duties of and Powers of Personal Representatives ." That's probably a good spot to start. And if we go down, you'll see in this section a number of things related to what has to be told to beneficiaries of a probate estate. And so here we see that the " Duty of Personal Representative - Information Heirs and Devisees ." And so in Colorado, when a probate process is started, within 30 days, there is information that is supposed to be sent to them about that probate case.

So here's a long list of all the items that need to be included, and you can see down below it says if they fail to give this, that is viewed as a breach of duty to the persons concerned. So this is kind of a big deal. If you've seen this, it's a document called the " Information of Appointment ." It honestly helpful, obviously, for them to know what's going on, but it doesn't contain a bunch of specific information about the estate.

That really starts with the next step. So if we go back here and we see " Duty of Personal Representative - Inventory and Appraisement ."

You can see that within three months in Colorado, after an appointment, a personal representative is supposed to create an inventory for the probate estate , listing all the assets with reasonable detail and indicating fair market value as of the date of the decedent's death and any encumbrances that may exist on that item. So that is kind of the first duty is to provide this inventory. And so you get 3 months because sometimes it does take a while to actually track down assets of the estate.

And you know, figure out what you got and then after that, there's a lot less clarity, frankly, in the statute about exactly what needs to happen. If we go back here and actually go back another step, we'll get down to " Closing Estates ." How do you close it? Here's a list of things that need to be done. And if we go here, you can see that in Colorado, a lot of estates are just closed by the personal representative signing a what's called a sworn statement confirming that they've done everything they need to do. And you can see down here that among the things that they need to provide is a copy of an account in writing of the administration. And that just really is a chronological list. I probably have that open somewhere, but if you actually Google again, probate accounting or something like that. In Colorado we have forms for this and it's not fancy. I describe it as basically a checkbook register and a chronological list of all money that went in and went out to the estate over the time.

And so really, that's the answer to the question, "What do you have to provide?" It is in the statute. And like I say, after those first couple of steps it gets pretty hazy as to how often a personal representative needs to do anything as far as disclosing information. They at least have to do it at the end.

So knowing that, knowing that eventually you are going to have to account, my usual advice to clients is, you know, let's do it more often. I think the rule of thumb is generally if the administration is taking more than a year, you should at least do an interim accounting, which is obviously different than a final accounting, just telling people, here's what I've done so far. So maybe at least annually. And the reason that that's the rule of thumb is that if you have a supervised estate, that's kind of what happens if, for some reason, the court is supervising the personal representative. They are supposed to account at least once a year.So that's kind of your baseline rule. But there's nothing saying you can't account more.

You account every time you spend money, or you receive money. You could actually send out an alert, I guess, to the beneficiaries. But that probably gets to be a little too much, right? But you could consider, I've had some personal representatives who basically, they have an estate account or a trust account and they're running all the transactions through, which is a really good idea because it keeps you organized, and they just send that bank statement out every month when they get it. And again, they don't have to. They're not legally required to do that. So why would they do that?

Given that you know that, eventually, you are going to have to provide the information, it's probably easier for you and for everybody else involved in this thing if you uncover issues sooner than the end, right? You'd rather know earlier on if somebody's going to have a problem with something. So maybe every month is a little excessive too. But I can't say it's a bad idea. You know, I think disclosure, I usually tell people to err on the side of disclosure because, again, you know it's easier to fix something if the transaction is relatively recent and somebody does, make a good objection then if it's a year later and you're trying to close the estate. Now somebody is objecting to something you did nine months ago, that's going to be harder to correct.

Of course, you providing an interim accounting does not necessarily get you off the hook if there are errors on it. Yyou might be tempted to say if somebody does complain down the road, like, "Hey, I gave you that accounting six months ago. You never said anything." You still have to do the right thing. Even if nobody's really paying attention. But I I think it would be a stronger case if you are the personal representative and you have been telling people or respond to an objection and you're able to tell the court, "Look, I've been telling these people the whole time, here's what happened. They knew about this transaction for months and never said anything." So that's probably a stronger case for you.

If you are the beneficiary of estate, sometimes this can be frustrating, kind of the lack of details on you know or the lack of responsibilities for what the personal representative has to tell you. There are some provisions in here about being able to request a status, and if you are a personal representative, you are supposed to respond to reasonable requests. So again, if somebody is calling you every week and saying, "Hey, where's my money? Where's my money? Tell me what you're doing." You know, that probably is not reasonable,

But if it's been some number of months and they haven't really heard anything, and they request information, you are supposed to provide it. As the personal representative, you have a duty to disclose information, right? So again, these are listed as duties . You are a fiduciary for these people. You're supposed to be  telling them what's going on. Again, you'd rather catch mistakes earlier than later, or find out about disputes earlier than later. But if you are the beneficiary of an estate, there are some provisions in here where you can submit a request to get a status update.

And the court might require that if it seems like it's reasonable and you know, you're not being overbearing about it. So a court actually will say, "OK, now an order has been entered. You have to provide information beneficiary." So there are some ways to get things you know, because sometimes estates can take years to administer, depending on what's in them.

So you don't want to wait years to find out what's going on. And even one year might feel like a really long time. So if there's some reason that you need to find out and the personal representative is not really sharing the information with you, there are ways to submit a request to the court to order them to do so. So hope that is helpful. If you are administering a state or a trust in the Colorado area, we would be happy to have a conversation with you.

If you feel like you're not sure about information to provide, our phone number here is 303-578-2745. Again, we are The McKenzie Law Firm. Our website is themckenziefirm.com . Thanks so much. I hope this is helpful.

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