How to administer an estate or trust
When you are named as a personal representative in a will, or a trustee in a trust, there are some important tasks that come along with your role.
First, order at least 10 death certificates right away, which can be done from the funeral director. It’s always less expensive and quicker than ordering additional copies later on. An EIN # (federal taxpayer identification number) will need to be established. You will probably not be able to access any of the deceased’s assets immediately. If there is a will that needs to be probated, you will have to wait until the court appoints you as the personal representative. If there is a trust and you were not an acting trustee during the deceased’s lifetime, you will need to sign a Consent to Act and a Certificate of Trust, establishing your authority as the trustee.
In your role administering an estate or trust, you must create an inventory. This is a complete list of all the assets in the estate or trust, valued on the date of the decedent’s death. This is going to be the starting value on the accounting. The accounting will show all expenses, income, receipts and distributions from the estate or trust account, down to the final penny. You must keep a record of every expense. Keep detailed records and notes because it will make your role much easier, especially when you are trying to balance the final accounting. If possible, try to avoid paying expenses out of personal assets and then reimbursing yourself. This should only be done as a last resort and if absolutely necessary.
Remember, these assets are not yours and can only be used for appropriate estate or trust expenses, and then finally to distribute to the beneficiaries according to the estate planning instrument. You cannot give scholarships, gifts, or donations on behalf of the deceased, unless that was established in the will or trust.
Talk with a tax professional to determine what tax returns need to be filed to ensure timely filing. Also, an appraisal may be necessary or advisable.
For all distributions made to beneficiaries, make sure to receive a signed receipt acknowledging the receipt of a full or partial share of the distribution. You don’t want them coming back later saying they never received something.
It’s always best to hire a lawyer to assist you in your role, which can be funded by the estate or trust. When you handle an administration on your own, you are taking on personal liability, and acknowledging that you have fulfilled your tasks as outlined in the estate planning instrument. If you miss a step or something is not done completely or accurately, you could be held personally liable. If a mistake or error is discovered after the estate or trust has already been fully distributed to the beneficiaries, no funds remain to cover the cost for professional assistance and/or your time to correct the error, and now you are not only personally liable, but you must use your own personal finances and time.
It can be a big responsibility administering an estate, so don’t hesitate to pay yourself for your time and expenses from the estate or trust funds. You were named in the documents because the deceased trusted you and believed you would act honorably and complete the tasks timely and faithfully. You should feel honored, but now make sure to honor the deceased’s wishes with integrity.