When people die, their property becomes their estate. Either their estate plan or state statutes determine who inherits what resources from the estate. A personal representative named by the decedent in their documents or appointed by the probate courts must follow estate planning documents and comply with the law.
If they make significant mistakes during estate administration, they could have a degree of personal liability. It is therefore crucial for personal representatives to ensure that they take the right steps during estate administration. Avoiding the three common mistakes below can help reduce the likelihood of major setbacks and legal challenges for personal representatives.
Distributing assets prematurely
There are several types of financial obligations that take priority over the inheritance rights of beneficiaries and heirs. Taxes and debts require payment before personal representatives make major distributions to beneficiaries. Especially in scenarios where an estate is insolvent and does not have enough assets to cover all of the decedent’s remaining financial obligations, premature distributions can lead to personal liability.
Failing to communicate with the right parties
There are many outside parties that require notice of estate administration and the passing of the decedent. Mortgage lenders, utility companies and other creditors require direct notice. The personal representative likely needs to file a final income tax return on behalf of the decedent. They may also need to handle income taxes for the estate as well. Failing to notify the appropriate parties and give them an opportunity to file paperwork with the probate court could lead to liability for the personal representative later.
Ignoring the law or a will
In cases where people die without testamentary instruments, state statutes dictate how the personal representative should distribute property. They need to conform to those rules rather than making their own judgment about how to distribute property.
If the decedent left testamentary documents, then the personal representative typically needs to follow their instructions even if they disagree with them. Particularly in cases where personal representatives have pre-existing relationships with estate beneficiaries, they might feel tempted to let their own preferences and relationships influence how they distribute resources. Deviations from the law or the estate plan could open a personal representative up to liability and removal litigation.
Avoiding common sources of liability and controversy can help people properly manage estate administration and probate proceedings. Personal representatives may require guidance to ensure that they follow best practices and avoid common mistakes, and that’s okay.
