3 estate administration mistakes that can result in personal liability

Estate administration involves accepting responsibility for someone else’s legacy. The personal representative of an estate must attend probate proceedings, properly manage estate resources and comply with the instructions left by the decedent.

Often, estate plans include a small amount of compensation for the services rendered by a personal representative or executor. However, the trade-off is the potential for personal financial responsibility in certain scenarios. Mistakes during the probate process could lead to financial claims against the representative. The following mistakes are among the most likely to lead to financial liability.

1. Failing to file necessary tax returns

Tax obligations are a top priority during estate administration. Both the decedent and the estate itself could have tax liabilities. A personal representative usually needs to file an income tax return on behalf of the deceased individual. They may also need to file an estate income tax return if they sell estate resources. Personal representatives must ensure that they filed the necessary tax paperwork and that they retain enough estate resources to pay tax obligations in full.

2. Not reaching out to creditors

Settling someone’s financial obligations involves more than just tax payments. It also means settling all financial liabilities. Student loans, credit card debts and medical bills are among the financial obligations that can require payment using estate resources. Personal representatives typically need to go through someone’s financial records and monitor their incoming mail to identify creditors. If a representative fails to provide appropriate written notice to known creditors or does not properly publish notice of estate administration for unknown creditors, the parties unaware of the probate proceedings could hold them accountable for the failure to pay those debts.

3. Distributing assets from the estate too soon

Creditors have months to bring claims against estate resources. The beneficiaries or heirs of the decedents may begin haranguing a personal representative long before that process ends. They may demand access to estate resources, which could lead to the personal representative distributing assets prematurely. Particularly when there is reason to believe the estate does not have enough resources to pay all obligations in full, distributing assets to beneficiaries might lead to personal liability for the representative. Creditors could hold them accountable for the value of any assets distributed to beneficiaries instead of used to repay debts owed by the decedent. Additionally, if the personal representative pays debts in the wrong order and fails to handle higher-priority debts, creditors might take legal action against them for that oversight.

Securing proper support during estate administration can help personal representatives avoid potentially expensive mistakes. People who understand the risks involved in estate administration may have an easier time protecting themselves legally and financially. Call us or contact us today for your free initial consultation.