When someone asks a person whom they trust to serve as their executor or the personal representative of their estate, that is in some ways an honor. It is also a bit of a burden, as a personal representative has a lot of responsibility. Not only do they need to communicate with the courts and someone’s beneficiaries, but they also need to file tax returns and submit other crucial paperwork to the state. There can also sometimes be financial liability that comes with estate administration.
In certain scenarios, the personal representative of an estate could end up responsible for certain financial obligations. When might financial culpability pass to the person administering an estate?
If they mismanage resources
There are very clear rules in trying in state law regarding the obligation to pay financial responsibilities during probate proceedings. If the estate does not have enough resources to fully pay someone’s debt, the personal representative does not automatically become responsible for those amounts.
However, if they make mistakes during estate administration, creditors that do not receive reimbursement might take legal action. The personal representative has an obligation to send written notice to known creditors and publish notice of probate proceedings to alert unknown creditors about the estate. Creditors can file claims in probate court requesting reimbursement for the debts owed by the decedent.
The personal representative must pay any valid debts in the right order of priority using estate resources, even if the process consumes all of someone’s assets. They need to pay certain costs and debts first. For example, costs associated with probate proceedings typically take precedence over unsecured debts accrued during someone’s life.
The claims of creditors almost always have priority over the inheritance rights of someone’s heirs or beneficiaries. If creditors can show that someone paid the wrong debts or distributed assets to beneficiaries, then they could potentially take legal action. The personal representative of the estate could be financially responsible for the debts and taxes that they failed to pay because they mismanaged the resources in someone’s estate.
Those who have accepted a role as a personal representative might benefit from securing legal representation to better ensure that they comply with all requirements and do not make mistakes that could result in financial liability. An estate typically covers the cost of that representation. Ultimately, learning about the risks inherent in serving as an estate representative may benefit those who have accepted such a role.