The death of a loved one is a very difficult time in anyone’s life. In addition to all of the responsibilities that family members of the deceased are faced with, a person who is named as a Personal Representative (often called Executor) in a Will, and is willing to serve in that role, must also accept the responsibilities required to properly administer the estate. The following is a short summary of some of those responsibilities:
COMMENCING A PROBATE ADMINISTRATION. A probate administration is necessary to transfer all assets held in a deceased person’s (“the decedent”) individual name. The process begins with filing the Application for Probate and Letters and the original Will (if one exists) with Estates Division of the Clerk of Superior Court in the county where the decedent was domiciled. The petition requests both the appointment of the Personal Representative and admission of the Will to probate. Upon the filing of the application, the Clerk will issue “Letters Testamentary” certifying the appointment as Personal Representative, who is now authorized to deal with all the facets of the estate, including paying creditors’ claims, managing real property, transferring bank accounts, and any other duties that become necessary to wind up the financial affairs of the decedent.
NOTICE TO INTERESTED PERSONS. After filing the petition, a notice is published in the local newspaper regarding probate of the Will. This puts creditors on notice that they have three months from the date of the first publication to file claims against the estate for payment of their accounts.
ASSET VALUATION. An inventory of the estate assets must be filed within 90 days of the appointment as Personal Representative. For tax purposes, the Personal Representative must also identify and value all non-probate assets owned by the decedent. These assets include any jointly owned assets, life insurance, annuities and retirement accounts.
FINAL PERSONAL INCOME TAX RETURN. The Personal Representative is responsible for preparing the final state and federal income tax returns for the decedent, which are due on or before April 15 the following year.
FEDERAL ESTATE TAX RETURNS. If, in year 2015, the decedent’s total assets (including life insurance and other death benefits) are over $5.43 million, a federal estate tax return may need to be filed. Such estate tax return is due nine months from the decedent’s death absent a request for an extension of time to file. Any tax due must be paid on the nine-month due date. A Personal Representative must also determine whether a surviving spouse may use a deceased spouse’s unused estate tax exclusion, a concept known as “portability.”
FIDUCIARY INCOME TAX RETURNS. The estate is a separate taxpayer and it is generally necessary to file income tax returns for the estate, reporting income received after the date of the decedent’s death and prior to distribution.
DISTRIBUTION OF ESTATE. Once the creditors claim period referred to above expires, and all tax matters are resolved, the Personal Representative will distribute the estate. As part of that process, the Personal Representative must file a detailed accounting reporting all the property in the estate presently on hand, and all income received and disbursements made during the probate process.
CLOSING THE ESTATE. Once distribution is completed, the Personal Representative files the Final Account with the Clerk to discharge the Personal Representative and close the estate.
PERSONAL REPRESENTATIVE’S COMMISSION AND ATTORNEY’S FEES. The Personal Representative is statutorily entitled to a commission for services rendered on behalf of the estate. North Carolina law authorizes payment from the estate of reasonable attorney fees for assistance in the administration of the estate. Attorney fees are paid after court approval and often at the time the estate is ready for distribution.