Should You Agree to Serve as Someone’s Personal Representative or Trustee?

dan • July 25, 2022

Many people engaged in estate planning underestimate the importance of choosing the right Personal Representative or Trustee (sometimes referred to as the executor). They treat these roles like honorary titles, to be bestowed upon a favored family member or friend as a reward for their loyalty and companionship over the years.

In fact, however, being an estate executor is a real job, with hard tasks, complex legal concepts, and a lot on the line. Serving as an executor often involves real estate transactions, tax transactions, negotiations with medical facilities and creditors, personal property valuation, organization and tracking large amounts of information, and personal money management.


Each of these tasks can be challenging enough when you are dealing with your own finances, with which you are intimately familiar, let alone someone else’s. If you have been nominated to serve as the Personal Representative or Trustee for someone who has passed away and are considering whether to accept the challenge, knowing what the job entails is critical. 


Fiduciary Duties

The first thing to understand about the property you are managing is that it is not yours. Because you will be in control of it, it will feel like yours, but you are merely managing it for the benefit of the estate’s beneficiaries and creditors. Some or all of it may eventually become yours, but not until it is properly transferred out of the estate and retitled to you.
In the meantime, you have fiduciary duties to the estate’s beneficiaries and creditors. A fiduciary duty is a duty to act in someone else’s best interest.
Sounds simple, right? Well, this seemingly simple concept contains lots of traps for the unwary. Among your duties, and the problems that frequently arise, are the following:
  • You have a duty to diligently administer the estate. There are surprisingly few deadlines in the probate process. The reason for the lack of deadlines is that the pace of administration is not totally under the executor’s control. Even modest estates can sometimes take years to administer if negotiations with creditors are necessary, or if the estate has difficult-to-liquidate assets, or if there will be a tax return due the following year, or if there are other legal processes involving the estate, such as a medical malpractice case or a personal injury lawsuit. Because there are so few deadlines, it is critical that the executor be a self-starter and not need a lot of oversight and reminders keep things moving at a reasonable pace. 
  • You have a duty to proceed in the best interest of all the beneficiaries, and not take sides or play favorites among them. This presents two challenges.

    First, what you think is in their best interest may not be what they think is in their best interest. Telling someone that they are wrong about what is best for them can require some awkward conversations, if not serve as the catalyst for litigation.

    Second, what is best for one beneficiary is not necessarily what is best for every beneficiary, and trying to decide whose interest should take priority over whose can require difficult decisions that have no right answer. This can be particularly difficult if the executor is also one of the beneficiaries, a common scenario.

    Even modest estates can contain personal property that more than one person wants, for example. Deciding who is going to get that property in a way that leaves the people who did not get it feeling that the process and outcome were fair can be a Solomonic feat.
  • Your fiduciary duties extend not just to the estate’s beneficiaries, but to its creditors as well. Every estate has creditors, even the estates of people who had little to no debt during their lifetimes. Obviously, the beneficiaries’ interests and the creditors’ interests are opposed to one another. Every dollar paid to a creditor is one less dollar going to the beneficiaries, and vice versa.

    In your own negotiations in your personal life, you can engage in gamesmanship with an opposing party. For example, you might understate your ability to pay to your own creditors, or you might threaten actions you do not intend to take, such as litigation or bankruptcy.

    You cannot, however, engage in deception, misrepresentation, threats, or gamesmanship with someone to whom you owe a fiduciary duty. You have to deal with them openly, honestly, and fairly. This does not mean that you cannot negotiate. But all parties that have an interest in an estate, both beneficiaries and creditors, have the right to see the estate’s inventory and accounting, and to be kept reasonably up to date on the administration progress. You are working         for them, not against them.
  • You have a duty to secure and protect the estate’s property. This means quickly taking steps to ensure that real estate is locked up (and possibly that locks are changed), car keys are accounted for, and personal property is not unknowingly removed. It also means locating the Decedent's bank accounts, investments, insurance policies, and other financial assets and retitling them to the estate.

    Over the long term, it means making sure that property insurance is kept in force, taxes are timely paid, and maintenance and upkeep continues as long as the estate continues to control the asset. Losing property to a natural disaster, tax liens, avoidable fees, or theft can be a breach of your duties. So can allowing property to fall into disrepair.

It can be surprisingly easy, even for a smart, capable person with the best of intentions, to run afoul of these duties. The law can be unforgiving when that happens.

Specific tasks you will be called on to Complete as an estate’s executor

In addition to the difficulties presented by fiduciary duties, the tasks an executor typically has to complete are often no simple matter. Those tasks often include:
  1. Securing estate property.
  2. Ensuring there is a plan to pay the Decedent’s debts and liabilities until they can be resolved or a longer term plan can be developed.
  3. Reviewing and organizing the decedent’s financial records.
  4. Correctly and timely notifying the Decedent’s creditors about the decedent’s death.
  5. Estimating property values (or getting appraisals done for property that is not going to be sold soon or in a public market)
  6. Inventorying the estate’s assets and liabilities.
  7. Preparing a house for sale (the amount of work this requires can vary widely depending on how much maintenance and upkeep the Decedent was doing).
  8. Negotiating the sale of the house.
  9. Filing an income tax return (maybe more than one, if the assets in the estate continue to produce income into a new calendar year).
  10. Filing an estate tax return.
  11. Figuring out what to do with personal property, which usually involves some combination of distributing to the beneficiaries, selling, donating, and throwing away.
  12. Correctly notifying the estate’s beneficiaries and keeping them reasonably apprised of your progress. 

None of these tasks is easy. Additional tasks that don’t necessarily need to be done in every estate, but can be especially difficult when they do arise, are managing a rental property or business, working with someone who is living in the Decedent's property without an ownership interest or lease, selling or transferring a closely held business, dealing with unique or valuable personal property, or dealing with angry, bitter, or otherwise difficult family members. 

Conclusion

Serving as an estate’s executor, whether that is as a personal representative or a trustee, is a real job with lots of responsibility and work.  It is often a thankless role, and in some cases, may make you the target of anger and resentment for decisions that were dictated to you by the Decedent or by the law. You should not go into the job lightly (and if you are in the process of trying to determine who should be the executor of your estate, you should carefully choose someone capable of this kind of work, not just default to your closest family member or friend).
On the other hand, if someone nominated you to be the executor of his or her estate, you should not summarily turn down the job without carefully considering why they thought you were the right person to do it. You should be aware that accepting the job does not necessarily mean you need to personally do every task described above. There are professionals that can do each and every task, and you can also hire a professional fiduciary or lawyer to help you. The costs of these services are typically paid by the estate. Help is available .

What next?

If you are about to be part of an estate administration, either as the executor or as a beneficiary, and you have questions., you can:
  1. Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
  2. Visit our estate administration page to learn more about your rights and responsibilities, whatever your role.
  3. Learn more by reading our blog or watching our videos .

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