By Phillip B. Rarick, Miami Probate Attorney
Executive Summary:
The following is a memorandum our firm gives to the person named as Personal Representative (in other states this role is referred to as the “Executor”) in the decedent’s will, or who is entitled to be Personal Representative under Florida law. This memo summarizes:
1. The different stages of probate;
2. The fiduciary powers of the Personal Representative; and
3. The duties of the Personal Representative.
Note: In Florida, every personal representative, unless the personal representative remains the sole interested person, must be represented by an attorney admitted to practice in Florida. Fla. Prob. R. 5.030 (a).
This is a summary, not a complete statement of the PR’s powers and duties. Additional questions should be addressed to an experienced Miami probate attorney.
MEMORANDUM TO THE PERSONAL REPRESENTATIVE
To: ______________, Personal Representative
From: ___________________ Esq., Attorney for Estate
Re: Estate of ______________________
You have been appointed as personal representative of an estate and you should be aware of your duties and responsibilities. The functions described here are often referred to under the term “settling the estate.” The process of settling the estate is a legal process and as your attorney I will counsel and advise you throughout this procedure.
A personal representative is classified in the law as a “fiduciary.” A fiduciary is a person who has been selected for a position of special faith, trust, and reliance. A “trustee” is another type of fiduciary and the duties and responsibilities which you leave in the settlement of this estate are quite similar to the duties and responsibilities that a trustee would have.
For the period of administration of the estate you are entitled to possession and control of all of the assets of the estate. Your duty is first and foremost to protect and preserve the assets and also to see that the assets are invested in a prudent and cautious manner. You need to identify and marshal all assets of the estate.
The persons to whom you owe these duties are, first, any creditors of the estate, and second, the beneficiaries of the estate. If your duties are not properly or competently performed, you may have to answer to any of these persons who have been harmed as a result.
After you receive your letters of administration, we will publish a Notice to Creditors which gives all creditors of the estate a 90 day window to file claims against the estate. You need to make a diligent effort to identify all creditors.
In order to make sure that you identify creditors it is important to file a change of address and make sure that all correspondence of the decedent comes to your mail address.
The process of probate, or administration of the estate, or settlement, depending upon the term you prefer, begins with filing the will for probate, preparation and filing of a petition for probate, and after various procedures which are my responsibility, the judge will sign letters of administration, a copy of which you will receive. The letters of administration are evidence of your legal authority to act as personal representative.
Once the administration procedure has begun, it will pass through several stages or plateaus. The first stage of the administration, after the letters of administration are issued, is that of giving notice to those persons who are involved or interested in the estate. Beneficiaries of the estate will receive the required notice by certified mail. Creditors are given legal notice by publishing a legal notice in the newspaper, but creditors whose names and addresses are known or reasonably ascertainable must be served with the notice personally or by mail.
The next stage of administration is that involved in identifying, collecting, inventorying, valuing, securing and investing the assets of the estate. An important part of making certain that assets are secure is arranging for adequate insurance coverage for tangible personal property or improved real property. A list of all of the assets and their values must be filed with the court in the form of an inventory, and, if the estate is of a size sufficient to require the filing of an estate tax return, similar information must be provided for the State of Florida and for the Internal Revenue Service. As your attorney, I will work with you in preparing the inventory list, obtaining the asset values and preparing the necessary documents that need to be filed.
During the early stages of administration (within approximately the first three months) any person having a claim against the estate as creditor is required to file the claim in the court. At the end of this initial period you will review any claims filed to determine that each appears to be valid and then promptly arrange for and make payment of all valid claims to avoid interest expense. Any claims not filed in this time period are not legal obligations of the estate, and in most instances cannot be legally paid.
Another stage in the proceedings of the estate is the determination of various tax returns that may be required by law to be filed for the estate. There may be many required tax returns; however, the most common are final income tax returns for the decedent, which may not have been previously filed, income tax returns for the estate, if the estate has more than $600.00 in income during its tax year, and a Federal estate tax return (Form 706), which is required by law to be filed if the total taxable estate exceeds $5.25 million for the year of 2013.
Note: Due to recent changes in the Federal estate tax law, it may be advisable to file a 706 estate tax return even if the estate does not exceed $5.25 million because of portability provisions in the new law.
As your attorney I will review the estate assets and the estate income to determine which, if any, tax returns are required to be filed. Merely because a tax return is required by law to be filed does not necessarily mean that any tax is due.
Throughout the estate proceeding, management of the assets is an important concern of the personal representative. Management of the assets includes investment of the assets, whether in bank accounts, government bonds, or other prudent forms of investment, to the extent that the estate has excess cash. A further and important consideration is liquidity management. The personal representative is required to sell assets or borrow money on behalf of the estate to meet the cash requirements as they arise, if cash available to the estate is not otherwise sufficient. Cash requirements for the estate include the payment of creditors, the payment of expenses of administration, and the payment of taxes.
After expenses, including taxes, have been paid, the next level or plateau of the administration is the procedure involving distribution of the estate to the beneficiaries. As your attorney, I will review the terms of the will, or in case there was no will, I will advise you of the provisions of the law that apply in order to identify the persons who are properly beneficiaries of the estate and who are entitled to distribution. I will also calculate the distributive shares after deduction of any taxes, which are attributable to each share. Distribution of the assets of the estate then occurs to the persons entitled, sometimes by distributing the assets directly in satisfaction of a bequest, and other times by selling those assets and converting them to cash, and then distributing the cash.
Another stage of the estate is closing out the probate. In this procedure the court enters its order discharging you as personal representative after your duties have been completed. In order to accomplish this estate closing, it is necessary to report to the court all of the legally significant activities which occurred in the estate and to furnish evidence that the creditors have been paid, that certain taxes have been paid, and that the remaining property has been distributed to the persons entitled to that property in proper shares. When this evidence has been presented in proper form, which is again my legal responsibility, the judge will sign an order, which discharges you as personal representative and terminates your obligations with regard to the probate.
The final stage of this procedure is the filing of any final income tax return that the estate is obligated to file for the year in which final settlement occurs. It should be remembered when the estate is closed that the estate may have had taxable income for that year or otherwise be responsible for the payment of taxes, and sufficient funds must be retained by you in order to enable you to pay these taxes that may be due.
As personal representative of the estate, in accepting that office and that trust, you have also agreed to be personally responsible financially for certain matters. Initially, of course, you have personal responsibility for proper administration, investment, and subsequent distribution of the assets of the estate. As I pointed out earlier, should you fail in this duty you may be sued by any person who has been injured by your failure. More important, however, is certain hidden liability, which you have assumed, and of which you should be aware, for the payment of various taxes that were owed by the decedent, or that may subsequently be owed by the estate. Upon the failure to pay these required taxes, the law permits the Internal Revenue Service, and in some situations, the State of Florida, to collect the taxes from your own assets. This would include the right to your personal bank account or place liens on real estate or other property which may belong to you personally. This, of course, occurs only if you failed to pay taxes from the estate that are required to be paid by you in your capacity as personal representative. It is because of this exposure to items that might otherwise be unknown to you that we should work closely together, and you should permit me to advise you at each level on your duties and responsibilities. Also, if you have any questions, you should not proceed without my advice.
I am pleased that you have selected me as attorney to represent you in this estate, and I hope that you will be satisfied with the manner in which we conduct this business.
Please sign and return this memo to indicate that you have received and read it.
________________________________
Client Name
DATE: _______________________, 20____
Special Note
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami probate attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.