Being a Personal Representative
Michael H. Marks
Linda Law Carroll412-421-8944
Information to Help You Understand the role and responsibilites of an Administrator or Executor of an Estate
After a loved one has died, the burden and uncertainly can be overwhelming to families. For many people, dealing with a loved one's estate can cause additional stress. It is our goal to assist you at this difficult time and to ensure that estate matters are handled in a timely and professional manner. This information is provided to help you understand the probate process and your role and responsibilites as personal representative. You may wish to refer to this page to use as a reference in the future.
The Commonwealth of Pennsylvania requires supervision of estate matters in order to ensure that a decedent's assets are properly managed and distributed to the correct recipients and that all the bills, claims, and expenses are paid. This system is called probate. You, as Personal Representative, are the person charged with administering the probate estate and you have a fiduciary duty to the beneficiaries to act in good faith.
You are, or are about to become, the Personal Representative for an Estate. If you were named in a Will you will be an Executor or Executrix. If your loved one did not have a Will, or if the person or persons named in the Will cannot serve, then you will be an Administrator or Administratrix. The term "Personal Representative" encompasses all of these titles. This information is designed to acquaint you with the responsibilities that you have assumed and to answer some of the many questions that you may have.
What is an Estate?
In general terms, the term "estate" is often used to refer to all the assets that were owned by a decedent (the person who died) on the date of his death. However, if the assets were owned jointly with others who have a right of survivorship in those assets or if the assets have persons designated as beneficiaries those assets can be transferred directly to the new owner and there is no need to open probate. An estate is considered to be an "informal estate" if all the assets were owned in this manner.
If the decedent's assets were held in the decedent's name alone, they must be inventoried and distributed according to Pennsylvania's probate procedures and a formal estate must be opened with the Department of Court Records, Wills/Orphans' Court Division (formerly known as the Register of Wills).
An attorney from this office will accompany you to the Department of Court Records to file a Petition for Probate and to have you sworn in as the personal representative of the estate. If you live out of state we will arrange to have you sworn in at your local courthouse. When you are appointed as Personal Representative, you will be given Letters Testamentary (if you are an Executor/Executrix) or Letters of Administration (if you are an Administrator/Administratrix.) These letters, commonly called "Short Certificates", are formal court documents granting you the authority to represent the estate. Banks and other financial institutions will release the decedent's funds and information to you when presented with a Short Certificate.
Duties of a Personal Representative
We are here to assist you with your duties which include the following:
- Locating and gathering the decedent's assets
- Paying bills, debts, expenses and taxes
- Preparing an accounting of all estate activity
- Distributing the estate
Gathering the Assets
As you gather the assets, the proceeds will be placed in an Estate checking account which we will open with you at a local bank. The bank will require that you show photo identification. We will obtain a tax identification number for the estate prior to opening the account. The estate checkbook will be kept at our office, but only you are authorized to sign the checks.
We will work with you regarding the disposition of other assets such as stock, bonds, personal property, and real estate. There are specific rules governing access to a safe deposit box, even if another person's name is listed as a co-owner.
You do not need to gather non-probate assets (assets that are automatically transferable to a new owner because, for example, the new owner was ajoint account owner with a right of survivorship or was listed as a beneficiary on an account). You will, however, need to report these non-probate assets on the Pennsylvania Inheritance Return.
Paying Bills, Debts and ExpensesBefore any bills, debts or expenses are paid, we will need to determine whether the estate will have sufficient assets to cover all expenditures.
If there are insufficient assets, the estate will be "insolvent" and we will work with you to determine which claims have priority over others, which claims may be paid in full, and which claims will be paid only in part.
If there are sufficient assets to pay all outstanding claims against the estate, you may pay these expenses out of the estate checking account. Please note that sometimes credit card companies will negotiate a reduction to encourage quick payment.
If you paid some expenses out of your personal funds before the estate checking account was opened you may be reimbursed from the estate checking account.
The personal representative is generally responsible for filing tax returns. We will prepare returns, as needed, based upon the information you provide to us for the following taxes:
- Decedent's final state and federal income tax, including any prior returns that should have been filed but were not.
- Pennsylvania inheritance tax return. Pennsylvania assesses a tax on the transfer of assets from a decedent to a beneficiary. The tax is a 0 for a spouse or charity, 4.5 for a parent or adult child, 12 for a sibling and 15 for all other beneficiaries. The Pennsylvania inheritance tax return must be filed, and the tax paid, within nine months of the date of death. A discount of 5 of the tax owed is given if an estimated payment is made within three months of the date of death. The tax is calculated only on the net estate, after assets are offset by debts and expenses, including administration and funeral-related costs.
- Some very large estates will owe Federal estate tax. The threshold at which the tax is required fluctuates significantly from year to year. The vast majority of estates do not pay federal estate tax. If your loved one's estate is large we will take a closer look at this Issue.
- Fiduciary income tax. If income is earned on the estate assets after the date of death, the estate, as an entity, may need to file state and/or federal income tax returns. Tax-deferred assets such as lRAs or annuities of which the estate is the beneficiary can give rise to significant taxable income. Federal income tax can be quite high and we will discuss with you options to reduce this tax burden.
As personal representative, you are responsible for making a complete accounting of the estate's receipts and disbursements. It is extremely important to keep .good records of all transactions so that the accounting will be complete and accurate. It is very important to use only one bank account. In most cases this will be the estate checking account and the checks will be kept in our office. If you make deposits into the account, please use separate deposit slips for each item and send us documentation showing the source of each deposit. Please keep good records of all bills and expenses that are paid.
Documentation is also needed to support deductions claimed on the Pennsylvania Inheritance Tax Return. Please make copies of all bills, expenses and funeral-related costs that are paid. Allowable deductions include the cost of funeral meals, clergy, flowers, grave markers, travel of the personal representative, the decedent's outstanding bills, and the cost of maintaining real estate, to name a few, and copies of all these bills and invoices must be retained.
Once probate is opened, the estate must mail notice to other interested parties and must place estate notices in newspapers. An Inventory is required be filed within 9 months of the date of death. As the personal representative you also have the responsibility of providing each beneficiary with an accounting of all estate activity. This can be done formally, through a court audit, or informally, and less expensively, by an Estate Settlement Agreement signed by all the beneficiaries. (If there is a dispute, or ifthere are minors involved, a formal Accounting must be filed and audited by the Orphans' Court.) If any creditors file valid claims against the estate, the claims must be satisfied before the estate can be closed. When the estate is completed, a Final Status Report will be filed.
Some of these filings will be done by us without any action on your part. We will assist you with the documents that require your input and/or signature.
Distributing the EstateThe process of probating an estate is not a quick one. It often takes longer than anticipated to gather the assets and financial information and to make all necessary payments. In addition, before concluding an estate, the inheritance tax return must be approved by the Pennsylvania Department of Revenue, which often takes five to six months.
If a decedent's Will gives a specific item of personal property or real property to someone, distribution of the property can often be done quickly. Final distribution of the remaining estate, however, must wait until the amount to be distributed is definite. Sometimes, preliminary distributions of a part of the estate are appropriate, but in most cases distribution occurs only at the very end when the estate is about to be closed.
Documentation and Information
The probate process ensures that there is a paper trail showing the disposition of a decedent's assets. It is important that you keep documentation that supports each action that you take as personal representative and each deduction claimed for tax purposes. The following are some of the documents and other information that we need:
- Original death certificates
- Copies of decedent's bank statements showing any activity just before after the decedent's date of death
- Original stocks and bonds
- Original death certificate for a predeceased spouse, if the estate contains real estate
- Original death certificate for any person named as a beneficiary of an asset or life insurance who died before the decedent.
- Names and addresses of all beneficiaries, and ages of minor beneficiaries.
- Your Social Security number
You are entitled to be compensated for your work as personal representative. This is taxable income to you in the year it is received. We will ask you whether you want to receive an administrative fee and will discuss with you an appropriate compensation.
As you can see, there can be a significant amount of work for a personal representative. The initial flurry of activity, however, generally settles down after the assets are gathered. Please be assured that we will try to make your job as easy as possible and that we are always willing to answer any questions you may have.