Picking a Personal Representative: It’s Not Just An Honorary Title

One of the most important parts of creating an estate plan is picking the person who will manage the winding down of your estate after you die. This person is known as the personal representative or the executor of the estate. Most people seem to think of naming the personal representative as a gift, like the cash and assets that they will be handing down to family, friends, and charities. In fact, however, serving as the personal representative of an estate can be a difficult and time consuming task, and choosing the right person for the job is critical.

Perhaps you worry about the message that you would be implicitly sending — that none of your family members are qualified to take on these tasks — and how it will be received if you choose someone outside the family to fill this role. Maybe you want to avoid creating a potentially confrontational situation between family members and an outsider. Or perhaps you don’t want the estate to have to pay someone to complete these tasks when a family member will do it for free.

These are legitimate concerns, but it’s critical to understand that “personal representative” is not just an honorary title. Doing it well requires certain skills that not everyone has. Picking a personal representative is not the time to worry about hurt feelings or saving a few bucks, because a bad personal representative can thwart the plans that you were so careful to put together. You need to consider the responsibilities that the personal representative will have, and find the person best suited to shoulder them for you. And you need to be open to the possibility that the best person for this role might not be related to you.

The personal representative’s responsibilities

So what, exactly, does a personal representative do? Here’s a list of tasks that personal representatives are frequently required to perform:

  • Find the original will and lodge it with the court.
  • Determine whether the estate is large enough to require probate, and determine whether it can be probated informally, or whether formal probate will be required.
  • File paperwork with the appropriate court to open the estate.
  • Obtain an employer identification number for the estate from the IRS.
  • Create a written inventory of the estate.
  • Re-register assets in the name of the estate.
  • Prepare and distribute a “Notice of Appointment” form to people and institutions that may have an interest in assets held by the estate, informing them that the estate exists and who they should direct inquiries about it to.
  • Inform all financial institutions holding money for the decedent about the decedent’s death.
  • Identify all bills that need to be paid by the estate, and publish a notice of death so that unknown creditors can submit claims. In the event that previously unknown creditors do submit bills, determine whether those bills are legitimate and need to be paid.
  • Identify and pursue any money owed to the estate.
  • File tax returns for both the decedent and the estate.
  • File the appropriate paperwork with the court to close the estate.
  • Keep thorough records of everything done on behalf of the estate.

Not only might the personal representative have all of these duties, but he or she can be held personally liable if money ends up going to the wrong person. Most wills do give the personal representative the right to receive compensation for reasonable time and expenses spent performing these tasks, but that money will be earned. To emphasize again, being named the personal representative of an estate is not a gift that you are bestowing onto someone. It’s a job, with serious responsibilities.

Picking the right personal representative

So who should you choose to fulfill this important responsibility? You need someone who will appreciate the seriousness of the job, who is organized and can keep track of large numbers of documents and deadlines, who can be trusted to put the interests of others before his or her own, who has some basic understanding of finances and how to keep track of money, and, maybe most importantly, who knows his or her limitations and will ask for help when appropriate. Perhaps you have a family member who meets these qualifications. But if not, you need to be honest with both them and yourself. In the end, after seeing all that was involved, your family members who didn’t get the job might thank you for sparing them the aggravation.

The Colorado Bar Association provides a helpful brochure about the responsibilities of a personal representative.

Dan McKenzie
Dan McKenzie
dan@themckenziefirm.com

Dan specializes in estate planning, estate administration, and small business counsel. He opened the McKenzie Law Firm in 2013, after spending 10 years as a litigator, seeing what can happen when people fail to carefully identify and mitigate their risks. He is pleased to be raising four kids in the same state where he grew up.