Choosing a personal representative is one of the most consequential decisions you’ll make when planning your estate. Failing to choose the right person—family member or otherwise—could result in the mismanagement of your estate. This, of course, could cause your wishes to be disregarded. If you don’t name a personal representative in your will, the court in your state and county will select an administrator for you. For these reasons, it’s important to choose wisely.
Here are some things to consider when choosing a personal representative for your estate.
First, what is a personal representative?
A personal representative is an umbrella term for the executor or administrator of an estate. Your estate’s executor is the person named in your will, whereas an administrator is granted the authority to manage your estate by the court (i.e., the decedent died interstate or didn’t have a will). A trustee is not considered a personal representative. A trustee is named in a trust and is duty-bound to follow the trust instrument to manage its assets.
Trustees, executors, administrators, and personal representatives are all considered “fiduciaries,” as they act for the benefit of another.
How many personal representatives can you have?
You must choose at least one person to be your estate’s personal representative. Some people choose two representatives so they can split the responsibilities. In fact, you can choose as many representatives as you want; however, choosing more than two may not be practical. Be sure to name an alternate (successor) in case the person(s) you select are unable or unwilling to serve.
The role of a personal representative is far-reaching and time-consuming. Typically, it involves the following:
- Thoroughly review the estate plan (i.e., the will, trust, or other documents)
- Handle the financial aspects of the decedent’s affairs
- File the appropriate paperwork and notify relevant individuals (often involves hiring an attorney and obtaining an EIN for the estate)
- Take control of, protect, value (date of death valuation), and manage all assets of the estate (may need to hire an appraiser)
- Pay off debts and final bills, notify creditors, and file and pay tax returns
- Dispose of assets and distribute to beneficiaries
- Close and finalize the estate
In addition to everything listed above, the personal representative must be prepared to handle sensitive family matters—all while the family is in the midst of grieving. What’s more, the personal representative must regularly communicate with beneficiaries to prevent distrust and perform the tasks listed above in a prudent manner. Keep this in mind: If the court feels the personal representative has not worked in the best interests of the estate and its beneficiaries, this individual could be held personally liable.
Who will serve as your personal representative?
Now that you understand what role of a personal representative entails, it’s time to think about who will serve as yours. Needless to say, it’s a decision you shouldn’t take lightly. In Part 2 of this blog series, I’ll share the traits you should look for in a personal representative and address the age-old question: Should a family member serve in this role?