So You've Been Appointed Personal Representative
By Mark E. Henze
The Personal Representative is the person who has been duly appointed by the Court to take actions and manage the estate in a probate case. Typically, your authority to act on behalf of the estate is shown by a Certified Copy of a document entitled “Letters Testamentary” or “Letters of Administration.” If anyone should question your authority, you’ll need to show them a copy of this document. In addition, you should make a number of copies for use in a variety of places. After you produce your original “Letters,” the place you are dealing with may want to keep one of the copies for their records. DO NOT give them your original Certified copy. Keep this for your use only. This document will be necessary to change the name on any monetary accounts, open bank accounts for the estate (if necessary), and to eventually transfer the title of the mobile home to yourself.
First, a few definitions:
Probate, in its narrow meaning, describes the process by which an instrument purporting to be a will is legally determined to be the effective Last Will and Testament. If there is no Will, it is also the process whereby the Court determines who the true heirs are, their percentages of distribution, and who the Personal Representative is that is authorize to act on behalf of the estate. Probate, in its broader sense, describes the entire process by which a decedent’s estate is collected, administered, and distributed.
Under the Colorado Probate Code terminology, an “Executor,” an “Executrix,” an “Administrator,” and an “Administratrix” are all called a “Personal Representative.”
You are the representative for the purpose of winding up the decedent’s affairs. This involves the assembly, collection, and valuation of the decedent’s assets, the payment of debts, expenses of administration and taxes, and the distribution of the remaining assets to the persons entitled thereto. This is generally described as administering or settling the estate.
As personal representative you have a number of responsibilities and duties to the beneficiaries of the estate. In general you have duties (1) to deal with the interests of the beneficiaries with impartiality; (2) to administer the estate solely with regard to the interests of the beneficiaries, as opposed to your own interest (the duty of undivided loyalty); and (3) to act prudently. The prudent person standard measures your conduct in management of the assets by you for the benefit of third parties, not as you could manage your own assets. Without the protection of a court order or the informed consent of the affected beneficiaries, you must not enter into any transactions with the estate in which you have a personal interest. As you have questions regarding your conduct and actions as personal representative, it is normally best to have a legal representative available or retained who can assist you in properly discharging your responsibilities.
The first step in the probate process is opening the probate case and securing your appointment as personal representative. Now that this has been accomplished, the administration of the estate begins. You must assemble, collect, and value all of the decedent’s assets and prepare an inventory of these assets within three months from the date of your appointment. All of the income of the estate and accounts receivable must be collected and accounted for. In addition, you should be looking into the existence of life insurance policies and beginning to file the appropriate claim under those policies. Note that if the insurance names a person or persons as beneficiaries, the life insurance proceeds are NOT part of the probate case or the inventory for the case. These moneys, when received, will be delivered directly from the insurance company to the named beneficiary(ies) and can be utilize without any further court approval.
A newspaper notice must also be published to alert possible unknown creditors of the opening of the estate. As to known or reasonably ascertainable creditors you should prepare a list and we’ll give them notice of the estate opening. Claims against the estate can be made either by filing them with the Court or by presenting you with the Claim as personal representative either by mail or hand delivery. Claims need not be on a special legal form. Generally, a regular bill or other statement for services will suffice as a legal claim. Under our Probate Code, claims are deemed to be allowed if you, as personal representative, do not take steps to disallow them within 63 days after the end of the claim period. Accordingly, it is important that you have someone to advise you regarding these claims so that they can be evaluated and proper action taken.
Complete records must be kept of all cash and investment transactions. You should now open a “estate” checking account at a bank of your choice if there are cash assets in the estate. Before you open this account, the bank will require you to get an official Tax ID Number (EIN) for the estate from the IRS. Keep good records of all receipts and disbursements that are transacted through the estate checking account. Be sure to keep track of ANY and ALL expenses you pay on behalf of the estate from your own personal funds. This may be necessary for a while until enough estate assets are collected in the estate bank account to pay these items. You are entitled to be reimbursed for ALL of these expenses, including travel costs, court costs, attorney fees, asset maintenance and protection costs (mortgages, utilities, car payments, required repairs, etc). Be sure to keep good records of these expenses before you reimburse yourself.
Where the gross estate exceeds $5,340,000 (or the current exemption amount – this changes as Congress acts), a federal estate tax return must be prepared, filed, and the tax paid within nine months from the date of death. In addition a personal income tax return for the deceased must also be prepared for the year of death. In addition, a federal fiduciary income tax return (Form 1041) for income received by the estate will be required in all years in which the income receive by the estate after the decedent’s death exceeds $600.00. A Colorado return (Form 105) for income received by the estate will generally be required when a federal return is filed.
After all known debts, administration expenses, and taxes have been paid or provided for, it will be time to prepare a final accounting. In the meantime, depending on the size of the estate and length of the period of administration, you may need to prepare one or more interim accountings. They will be given to the interested parties (the heirs). You will then be able to distribute the remaining assets to the appropriate distributees and appropriately change the titles to any assets that are being distributed (real estate / cars).
The administration of this estate is obviously an important process. It clears the title to the decedent’s property. It settles legitimate debts and wipes out others. It may establish a new tax basis for the property in the estate and protects you from future legal obligations in making distribution of the property to the persons entitled thereto. This should be a pretty simple estate at this point, but please don’t hesitate to call, write, e-mail should you have any questions along the way.
© 2020 Henze & Associates, P.C.