The will determines the beneficiaries of an estate. If you don't have a will in place when you die, you can be described as dying "intestate." Intestacy laws determine beneficiaries if there isn't a last will and testament. Intestacy laws vary by state.
Learning the Basics for Yourself or Loved Ones
It's helpful to have a basic understanding of the estate administration process. Otherwise, the whole experience can be overwhelming. FindLaw's section on estate administration basics provides information on how to manage an estate. It also includes details about what being an executor means and what happens to a person's debts after death. This section provides resources on estate administration that will help executors and personal representatives. This section also includes basic information about important estate planning documents that should be in place during a person's lifetime.
Estate Administration Overview
Everything a person owned when they died makes up their estate. Many estates must undergo complex processes and probate proceedings in court. The process requires someone to be responsible for the following:
- Managing the overall estate
- Ensuring nothing is wrongly taken
- Ensuring property doesn't lose value due to neglect
The person responsible for administering an estate is usually called the personal representative. In some states, they may also be called the executor if the decedent died with a will. Those who do not have a will are said to have died "intestate." States have different rules about the distribution of a decedent's estate. These fall under state laws relating to intestacy.
Some estates may escape the formal probate process altogether. For example, an asset that allows the owner to name a beneficiary will not need to go through probate. Common types of inherited assets not subject to probate include:
A last will and testament can also include directives relating to minor children, dependents, or those with special needs.
Who Can I Pick for My Personal Representative or Executor?
An estate's personal representative or executor may be a person or a company such as a bank. During estate planning, you can name a personal representative. Although anyone, with limited exceptions, can serve as a personal representative or executor, they must act with diligence and good faith.
The probate court could appoint a personal representative if someone dies without a will. Once an executor or personal administrator is appointed, they are called the personal representative.
The courts can appoint a personal representative if:
- The will doesn't nominate an executor
- Multiple individuals apply to serve as the personal representative
Married people often appoint their spouse to be their personal representative if possible. Another close family member is also a typical choice for the personal representative. In some cases, the will can name more than one representative.
Personal Representative Duties
For a personal representative to handle the estate's financial matters, a court must issue an order. The court typically appoints the personal representative with testamentary letters or letters of administration. The personal representative is responsible for the following:
- Locating and collecting all of the deceased person's property
- Paying debts and taxes
- Distributing the remaining property and money to beneficiaries
The personal representative does not get any proceeds from the sale of property in the estate. However, they are typically entitled to be paid a fee for handling the estate during the probate process.
The personal representative may also hire an estate attorney — at the estate's expense — to help them with the probate process. A probate attorney can provide legal advice on the personal representative's duties.
Basic Tasks When Caring for the Decedent's Estate
To the extent possible, a personal representative ensures a person's last wishes for their property and possessions are granted. The law doesn't require the executor of a will to be a lawyer or accountant. But it does require that the executor fulfill their duties with the utmost honesty and diligence for the estate's best interest. This obligation is known as the fiduciary duty.
Some typical duties include:
- Identifying, locating, and maintaining the assets of the estate until the distribution
- Determining which assets to sell
- Determining the necessity of probate
- Finding and contacting the beneficiaries named in the will
- Filing the will with the appropriate probate court, which is often required even when probate proceedings are not necessary
- Managing the financial affairs of the estate
Managing Estate Finances Appropriately
The personal representative needs to make prudent decisions on behalf of the estate. This includes:
- Canceling credit cards
- Notifying creditors
- Contacting retirement plans that serve as the custodian for any retirement accounts or IRAs
- Notifying insurance companies
- Paying debts
- Making necessary payments such as mortgage and insurance payments
- Filing taxes, including income tax and any gift tax returns, as required by tax law
- Paying taxes
- Closing or setting up new bank accounts to manage the estate's financial affairs
- Understanding and gathering life insurance policies
A personal representative acts dishonestly or carelessly with the estate's finances when they fail to pay debts on time. In that case, the personal representative may be subject to legal action.
Inventory All Assets and Administer Debts
The personal representative is responsible for taking stock of the decedent's assets and identifying debts. The personal representative pays debts from the estate. If the decedent's assets aren't enough to pay the debts, the personal representative must seek the court's approval to determine the order of priority for paying debts.
There may also be inheritance taxes, estate tax returns, administration expenses, and other requirements for probate assets. If assets remain after satisfying all debts and obligations, the personal representative distributes the estate's remaining assets according to the will.
Who Is Responsible for a Deceased Person's Debts?
As explained above, a person's debts are paid from their estate after they die. Relatives or beneficiaries are usually not responsible for paying the deceased person's debts.
However, a relative or beneficiary could be responsible for repaying the debt if they:
- Owned part of the debt
- Received substantial benefits from the debt
For example, credit card debt belongs to the account holder. The co-signer or other account holder would have to pay the debt if:
- They co-signed the loan
- The individual had a joint credit card account with the decedent
It's important to note that the surviving spouse may be liable for the debt in states with community property laws. In community property states, debts acquired during the marriage are considered jointly owned.
Administering an Estate Across State Lines
Generally, the estate goes through probate in the state where the decedent lived when they died. However, an estate may need to be administered across state lines. For example, any real estate the person owned in another state might face probate court there. State law where the real estate is located governs the probate process for the property.
Estate Planning Documents Operative During Life
The estate administration process is related to estate planning. Estate planning can involve tax planning and properly titling assets during your lifetime if, for example, a revocable living trust fits your plan.
In estate planning and estate administration processes, estate planning attorneys can explain your options. The estate planning process should include legal documents that take effect during your lifetime, not only once you die. Certain legal documents created during the estate planning process can protect you before death, too. These documents include the following:
Power of Attorney
A power of attorney allows you, as the "principal," to name someone with the authority to make decisions and act on your behalf. The person you name is called your agent or attorney-in-fact. The person you appoint does not have to be an attorney, though.
The principal can decide what kinds of control the power of attorney should have. Some common powers include the following:
- Paying bills
- Handling legal or insurance claims
- Making gifts or donations
- Conducting business transactions
- Making decisions about long-term care
A durable power of attorney is a type of power of attorney that lasts longer than others. Specific language must appear in the legal document to make it durable. Otherwise, the agent will lose their power of attorney if you can no longer make your own decisions.
If you are incapacitated by illness or declared incompetent, someone with durable power of attorney can continue to act on your behalf. A durable power of attorney generally remains in effect until death unless a court declares the document invalid.
The principal can also revoke someone's durable power of attorney. And after a divorce, a former spouse could lose their agent status in some cases.
The two main types of durable powers of attorney are financial power of attorney and medical power of attorney. A durable power of attorney for finances gives the agent the authority to manage your financial affairs if you become incapacitated and cannot manage them yourself. A medical power of attorney gives your agent the authority to make medical decisions when you cannot.
A general power of attorney can include a combination of the powers to include financial, legal, business, and medical decisions. As the name suggests, a limited power of attorney limits the powers granted to the agent. A power of attorney can even be confined to one process or event, such as the authority to purchase a particular piece of real estate.
Living Will and Health Care Directives
A living will, also known as a health care directive, lets your loved ones know what kinds of treatment you want and don't want. A living will is a type of advanced health care directive.
A living will ensures that a person's medical care and end-of-life care wishes are carried out if they become mentally incapacitated. This document helps provide certainty because it gives others advance notice of your wishes. When a living will meets your state's legal requirements, its instructions are legally valid and binding. If you ever face a terminal illness or serious medical condition, this document can bring peace of mind to you and your loved ones.
When to Hire Legal Counsel
If you are in charge of administering an estate, you can contact an experienced probate attorney. Consider consulting an estate planning attorney to create an estate plan. Estate planning and probate administration are closely related. An estate planning attorney is often knowledgeable in probate administration and vice versa. But you should begin with the legal directory most closely related to your current legal issue.