Serving as a personal representative of an estate often means making certain sacrifices. For example, personal representatives may need to take time off of work to attend court hearings. They may notice strain in their close relationships because people are upset about the terms established by the testator or the way state law mandates the distribution of estate resources.
They may also take on a degree of personal liability if they fail to follow the right procedures during estate administration. Financial obligations that were initially the responsibility of the decedent or the estate itself could become the responsibility of the personal representative in certain cases.
What liabilities do people need to proactively avoid when serving as the personal representative of an estate?
The debts of the decedent
Most people have a handful of debts at any given point in their lives. People may have balances due to healthcare providers or credit card debts to cover. They may have student loans or mortgages.
The personal representative of an estate has a responsibility to use estate resources to pay debts before they begin distributing assets to beneficiaries. Especially in scenarios where the estate may be insolvent and may not have enough money to pay every debt in full, avoiding premature distributions and handling debts in the right order of priority is the best way to protect the personal representative from liability for financial obligations.
The taxes that are still payable
There are several kinds of taxes that can influence estate administration. The personal representative usually files a tax return on behalf of the deceased. The estate itself may also be subject to income taxes if the personal representative sells assets and produces more than $400 in revenue by doing so.
There could also be estate taxes to consider if the estate is worth millions of dollars. When a personal representative does not retain property to cover tax responsibilities, they may face legal liability and collection efforts in the future due to their oversights.
Having support throughout the estate administration process may help people avoid scenarios in which they will need to face litigation and financial liability for taxes and debts that were originally the responsibility of the deceased individual or the estate itself. Personal representatives may benefit from working with a lawyer throughout the probate process to avoid oversights that could have costly consequences.