Estate administration involves many responsibilities for a personal representative. They have to locate the will and submit it to the courts. They have to physically secure valuable assets and create an inventory of property.
They need to communicate with beneficiaries and other parties who may have an interest in the estate. They also have an obligation to repay creditors. Debts, funeral costs and taxes are examples of the financial obligations that personal representatives have to address during estate administration. If they make significant mistakes during that process, they may face removal from their position or possibly even personal financial responsibility for debts accrued by the decedent or the estate itself.
Failing to communicate with creditors
Generally speaking, personal representatives need to send direct written notice to known creditors. Mortgage lenders, credit card companies and other creditors deserve prompt notice about the death of a party who owes them money and the need to file a claim in probate court.
Personal representatives typically also need to publish notice about impending estate administration in local newspapers for unknown creditors. Failing to take appropriate steps and document doing so can lead to claims that a personal representative did not provide mandatory notice.
Paying debts in the wrong order
Some estates are insolvent. They have limited assets and may face numerous different financial obligations. In such cases, state law makes it very clear which debts take priority over others.
Estate administration expenses and then funeral expenses have the highest priority. Medical expenses from end-of-life care are the third most important financial obligation. After that, the personal representative may need to allocate resources for a family allowance paid to surviving dependents, such as spouses and children.
Medicaid estate recovery efforts, tax debts, wages, judgments and personal debts also all likely require repayment with estate resources in roughly that order. Paying them in the wrong order can result in claims made by unpaid creditors.
Making premature distributions
Personal representatives don’t always know exactly what debts may come to light during estate administration. They expose themselves to financial risk if they distribute assets to beneficiaries before the window for creditor claims has closed.
Typically, with exceptions for low-value personal property, best practices require that personal representatives wait to make significant distributions until after they have resolved all outstanding financial obligations.
Personal representatives who have support throughout estate administration are less likely to make mistakes that could lead to personal liability. Getting the right help can make it easier to fulfill the last wishes and outstanding obligations of a recently deceased individual.