Serving as Personal Representative or Trustee, a Step By Step Guide

Serving as Personal Representative or Trustee, a Step By Step Guide

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 of 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 done by the decedent, during his or her lifetime). Administration of a Trust involves more than simply 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. We recommend seeking professional help, and are here for you if you need us. Give us a call to talk through the process with our friendly and knowledgeable team.

Tienne McKenzie
Tienne McKenzie
tienne@themckenziefirm.com

Tienne is a paralegal specializing in estate planning.