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American Bar Association - Defending Liberty, Pursuing Justice

March 2008

Vol. 4, No. 2

Estate Planning

 

Administrator of a Probate Estate: Duties and Responsibilities

The procedures in an estate administration may take from six months to several years, and a client’s patience may be sorely tried during this time. However, it has been our experience that clients who are forewarned have a much higher tolerance level for the slowly turning wheels of justice.

The following is a portion of the duties of an administrator:

Some of the Duties of the Administrator in Probate Estate Administration

  1. Conduct a thorough search of the decedent’s personal papers and effects for any evidence that might point you in the direction of a potential creditor;
  2. Carefully examine the decedent’s checkbook and check register for recurring payments, as these may indicate an existing debt;
  3. Contact the issuer of each credit card that the decedent had in his or her possession at the time of his or her death;
  4. Contact all parties who provided medical care, treatment, or assistance to the decedent prior to his or her death;

The attorney for the administrator will not be able to file any estate or inheritance tax return until it is clear as to the amounts of the medical bills. Medical expenses can be deducted in determining the amount of any inheritance tax.

In a Supreme Court case, Tulsa Professional Collection Services, Inc., v. Joanne Pope, Executrix of the Estate of H. Everett Pope, Jr., Deceased, the court held that the administrator/personal representative in every estate is personally responsible to provide actual notice to all known or “readily ascertainable” creditors of the decedent. This means that it is the administrator’s responsibility to diligently search for any “readily ascertainable” creditors.

Other Duties of the Administrator

In General

The administrator’s job is to (1) administer the estate—i.e., collect and manage assets, file tax returns and pay taxes and debts—and (2) distribute any assets or make any distributions of bequests, whether personal or charitable in nature, as the deceased directed (under the provisions of the will). Let’s take a look at some of the specific steps involved and what these responsibilities can mean. Chronological order of the various duties may vary.

Probate

The administrator must “probate” the will. Probate is a process by which a will is admitted. This means that the will is given legal effect by the court. The court’s decision that the will was validly executed under state law gives the administrator the power to perform his or her duties under the provisions of the will.

An employer identification number (EIN) must be obtained for the estate; this number must be included on all returns and other tax documents having to do with the estate. The administrator should also file a written notice with the IRS that he or she is serving as the fiduciary of the estate. This gives the administrator the authority to deal with the IRS on the estate’s behalf.

Pay the Debts

The claims of the estate’s creditors must be paid. Sometimes a claim must be litigated to determine if it is valid. All estate administration expenses, such as attorneys’, accountants’, and appraisers’ fees, must also be paid.

Manage the Estate

The administrator takes legal title to the assets in the probate estate. The probate court will sometimes require a public accounting of the estate assets. The assets of the estate must be found and may have to be collected. As part of the asset management function, the administrator may have to liquidate or run a business or manage a securities portfolio. To sell marketable securities or real estate, the administrator will have to obtain stock power, tax waivers, file affidavits, and so on as the case may be.

Take Care of Tax Matters

The administrator is legally responsible for filing necessary income and estate-tax returns (federal and state) and for paying all death taxes (i.e., estate and inheritance). The administrator can, in some cases, be held personally liable for unpaid taxes of the estate. Tax returns that will need to be filed can include the estate’s income tax return (both federal and state), the federal estate-tax return, the state death tax return (estate and inheritance), and the deceased’s final income tax return (federal and state). Taxes usually must be paid before other debts. In many instances, federal estate-tax returns are not needed as the size of the estate will be under the amount for which a federal estate-tax return is required.

Often it is necessary to hire an appraiser to value certain assets of the estate, such as a business, pension, or real estate, because estate taxes are based on the “fair market” value of the assets. After the filing of the returns and payment of taxes, the Internal Revenue Service will generally send some type of estate closing letter accepting the return. Occasionally, the return will be audited.

Distribute the Assets

After all debts and expenses have been paid, the administrator will distribute the assets. Frequently, beneficiaries can receive partial distributions of their inheritance without having to wait for the closing of the estate.

Under increasingly complex laws and rulings, particularly with respect to taxes, in larger estates an administrator can be in charge for two or three years before the estate administration is completed. If the job is to be done without unnecessary cost and without causing undue hardship and delay for the beneficiaries of the estate, the administrator should have an understanding of the many problems involved and an organization created for settling estates. In short, an administrator should have experience.

At some point in time, you may be asked to serve as the administrator of the estate of a relative or friend, or you may ask someone to serve as your administrator. An administrator’s job comes with many legal obligations. Under certain circumstances, an administrator can even be held personally liable for unpaid estate taxes. Review the major duties involved before you accept such a responsibility.

Kenneth A. Vercammen is a Middlesex County, New Jersey, trial attorney who has published 125 articles in national and New Jersey publications on probate and litigation topics. He is chair of the ABA General Practice, Solo & Small Firm Division's Estate Planning, Probate & Trust Committee.

© Copyright 2008, American Bar Association.