Personal Representative Duties

The Personal Representative’s Tasks, Duties & Liability

personal rep duties

The personal representative is the person tasked with administering the estate.  Being a personal representative can be a demanding. Those who serve should realize that they are being appointed to what amounts to a job.  With some estate, it can even be a full-time job, a stressful job, and often a thankless job.

The Personal Representative’s Tasks

The probate process includes several tasks that have to be completed.  The tasks that have to be completed will vary from one estate to another.  The personal representative has to ensure that these tasks are completed. At a high level, the tasks for most estates include the following:

  1. Securing and collecting the decedent’s assets
  2. Giving notice to the decedent’s creditors and paying valid claims
  3. Filing the decedent’s final income tax and estate tax returns
  4. Winding up decedent’s affairs
  5. Distributing the remaining assets to the beneficiaries

This is not an exhaustive list.  There are several additional tasks are noted in the balance of this guide and several that may not be covered as they are not as common.

The Personal Representative’s Duties

Tasks are different than duties.  While tasks have to get done, duties are things that the personal representative can be held liable if the tasks are not completed or not completed timely or correctly.  The personal representative’s duties include the following:

  1. Keeping the beneficiaries informed.
  2. Accounting for revenue received, money spent, assets transferred, etc.
  3. Keeping the estate finances separate.
  4. Making productive use of assets, i.e., not leaving estate funds univesnted.
  5. Not engaging in self-dealing.
  6. Collecting and protecting estate assets, including maintaining insurance.
  7. Providing notice to creditors.
  8. Preparing an inventory and filing an annual accounting.
  9. Filing tax returns.

Liability for Personal Representatives in Texas

The personal representative should be aware that they may be found personally liable in some cases. Questions about liability often involve liability to the beneficiaries or heirs, creditors for dissipated assets, and the IRS for taxes.

Personal Liability to the Beneficiaries or Heirs

The personal representative is generally not liable to the beneficiaries or heris absent some violation of the law, fiduciary duty, etc.  State law provides the full range of civil remedies for any violation. Beneficiaries and heirs may be able to recoup damages from the personal representative in these cases.  In addition to the normal civil remedies, the personal representative may also be forced to act by a show cause hearing initiated by an interested party or by order of the probate court.

Personal Liability to Creditors

Texas law is not entirely clear on whether the personal representative is liable to estate creditors.  There are a number of court cases on point. These court cases address situations where the personal representative used probate assets to make distributions to heirs or to pay other claims.  The results have been mixed, but it is generally thought that the personal representative is not liable to creditors. Given the uncertainty of the law in this area, creditors will continue to assert that the personal representative is liable and the Texas supreme court may eventually issue a ruling on this issue.

Personal liability to the IRS

Federal law provides that the IRS’s claims for unpaid taxes have to be paid first. The courts have carved out a few exceptions, such as compensation paid to the executor, widow’s allowances, funeral expenses, and probate attorney fees.

The first priority payment of Federal taxes is especially important if there are not enough assets to pay all of the decedent’s debts.  It can also be important if the Federal tax liability is not discovered until after distributions are made to heirs. When possible, the personal representative should have the heirs sign agreements saying that the distributions will be returned to the estate should Federal taxes or other liabilities arise if the estate does not have sufficient assets to satisfy them.

But what if the personal representative distributed the assets and is not able to recoup them to satisfy the Federal tax liability?  The law holds the personal representative liable for these amounts if they knew of the tax or had constructive knowledge of the tax. This includes liability for income, estate, gift and other taxes.  There are steps the personal representative can take to limit the time for this liability, including the filing of a Form 4810 or Form 5495.

The personal representative may also have to post a bond.  We’ll address this topic next.  Click here to continue reading.  >>>>

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