Top Ten Mistakes Personal Representatives Make
If you have been named the personal representative of an estate, you need to know what you should and should not do. First, simply being named in the will does not give you the authority to act. To become authorized, you must file the will with the probate court in the decedent's county of residence and file an application for appointment as personal representative with the probate court.
Appointment by the court as Personal Representative
When the court reviews and approves your application, then you you have the authority to collect and secure the decedent's property. As evidence of your authority, the court will issue you a Certificate of Appointment in South Carolina or a Letter Testamentary in North Carolina that proves you have the authority to act on behalf of the decedent. This is the document you should take with you to the bank to open an estate account and to handle other estate matters.
Because personal representatives manage money and property belonging to others, they have a legal duty to protect the decedent's assets and distribute them according to the will or laws of intestacy. Personal representatives owe the people who will receive the property a duty of loyalty. This duty of loyalty is called a fiduciary duty and requires the personal representative act in the best interest of the beneficiaries, not in the best interest of the personal representative - even if you are also a beneficiary. If you, as personal representative, don't act in the best interest of the beneficiaries, you can be personally liable for mistakes managing estate property.
Staying out of trouble while serving as Personal Representative
So, how do you stay out of trouble if you are serving as personal representative? Here are the top ten mistakes I see personal representatives make. Although all of the mistakes can be serious, number 1 is the worst!
10. Not securing estate property. Sometimes, personal representatives fail to identify and locate all of the decedent's property. If a personal representative is negligent in locating property or in securing the decedent's home so others cannot take the property, the personal representative may be personally liable for missing or damaged property.
9. Not keeping proper records. This includes a number of mistakes. For example, not inventorying and accurately appraising property, or not tracking distributions of estate property and obtaining receipts.
8. Choosing the wrong type of probate and/or not including all of the decedent's probate property. This can either cause you to spend more time in probate court than the estate needs or less time. If property is left out of probate, someone may have to go back years later and probate it.
7. Missing court deadlines. Failing to file inventories and accountings on time. Failing to file closing documents on time.
6. Paying expenses out of order. Most states have a statutory priority for paying expenses. If a personal representative pays an expense before another expense that has a higher priority and the estate runs out of cash, the personal representative may be personally liable for paying the remaining expenses out of his or her own funds.
5. Not publishing a notice to creditors. This can delay the end of the creditor claim period and subject the estate to expenses it would not have had to pay otherwise.
4. Not responding appropriately to creditor claims submitted to the estate. For example, paying late claims after the filing deadline.
3. Creating title problems for real estate. This is especially a problem in South Carolina with do-it-yourself probates because when there is real estate involved, the personal representative must sign a deed of distribution to distribute the real property through the estate and release the personal representative's claim on the property. Personal representatives without attorneys frequently mess this up and make mistakes on the deed of distribution. Sometimes, the personal representative even distributes the property to the wrong person! These mistakes can create real estate title problems that may not be discovered until years later when a beneficiary or even the descendant of a beneficiary attempts to sell the property. If you are in North Carolina, depending on the estate, it may not be easier. There can be title problems in North Carolina because of a number of factors including: the creditor claim period; whether probate is needed to clear title; or whether court permission is required to sell the property and pay estate debts.
2. Commingling estate property with your own. The second biggest mistake a personal representative can make is commingling estate money and assets with their own. Personal representatives must be careful not to treat estate property as their own or deposit estate money in their own bank account.
1. Paying improper expenses from the estate and/or using estate property for your own expenses. The biggest mistake a personal representative can make is to use estate money to pay his or her own personal expenses and to use the estate to benefit the personal representative personally. The assets of the estate belong to the beneficiaries, not the personal representative, and the personal representative must avoid self-dealing. This is a serious breach of the personal representative's fiduciary duty and is a big no no!
As you probably realize by now, serving as a personal representative is like having a second job. There is a lot to know and a lot to do. Even if you are not an attorney, you will be expected to know and comply with all court rules. The size and type of property in the estate and family dynamics can make this job even harder. For more information on how you can stay out of trouble while serving as a personal representative, give us a call at 704.887.5242 or fill out the contact form below.
DISCLAIMER: This blog contains general educational information only. The information in this post does not constitute legal advice to you and reading the information does not create an attorney-client relationship with Nancy Roberts or the Law Office of Nancy L Roberts, PLLC. You should not rely on this information as legal advice. Before taking any action, you should always seek legal advice from an attorney you hire, who advises you based on your specific facts, circumstances, situation, and the appropriate governing law.