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Estate Administration

Estate administration can be an extremely complicated process, replete with technical intricacies that must be executed in accordance with specific legal requirements under the supervision of the court.

An executor or administrator’s actions are held to the highest standards and the personal liability attached to such fiduciary capacity can have severe consequences if his or her duties are not discharged accordingly.

When an individual passes away, the estate representative must collect the decedent’s assets, pay his or her debts, along with the expenses of administering the estate and any estate taxes, and only after the “closing” of the decedent’s estate should the assets be fully distributed to the decedent’s beneficiaries. Such distribution is either in accordance with the decedent’s last will and testament or the state law rules of intestacy.

An integral issue of estate administration is determining whether an asset is part of the decedent’s testamentary estate. For example, the following assets may not require administration by the estate representative, passing either by operation of law, pursuant to a beneficiary designation, or otherwise:

  • life insurance
  • property held jointly with rights of survivorship;
  • “transfer-on-death” or “payable-on-death” accounts;
  • annuities;
  • retirement accounts; etc.

What is probate?

Probate is the judicial process by which the Surrogate’s Court inquires into the validity of an instrument purported to be a decedent’s last will and testament, and determines whether it is, in fact, the individual’s “will.” Probate is complete when the court accepts the purported instrument as the decedent’s last will and testament and appoints the proponent as the executor of the estate, who must then administer such estate in accordance with the decedent’s will. If the decedent’s family members and the beneficiaries of his or her estate are all in accord, probate is a relatively quick and streamlined process. Certain safeguards can also be put into place during the estate planning process, prior to the decedent’s death, to avoid any potential delay and/or problems caused by discord among the family members and the beneficiaries.

In the case of no valid will

If the decedent does not leave a valid will, his or her estate goes through the process referred to as “administration.” An individual determined by a statutorily prescribed hierarchy petitions the court to be appointed as administrator of decedent’s estate. Once appointed, he or she administers the estate and distributes the assets in accordance with the default rules of intestacy.

The executor or administrator (representative) serves under the supervision of the court. The court appoints him or her to oversee the collection of assets and the payment of debts, etc., but the representative must also submit reports to, and may have to request permission from, the court in order to take certain actions.

By virtue of this appointment, the representative becomes more than a mere officer of the court. Rather, that representative is transformed into a fiduciary, which is a capacity fraught with potential personal liability. Overarching all of the intricacies of estate administration is a fundamental rule – the representative is a fiduciary of the estate, its beneficiaries, and even its creditors. The representative must discharge his or her duties with care, skill and prudence, and without any conflicts of interest that may interfere with upholding the interests of the estate and the persons for whom she is acting in a fiduciary capacity.

Accordingly, the representative must always keep in mind that each action he or she takes will be scrutinized in relation to its impact on those whose interests he or she is obligated to champion. This duty becomes particularly difficult to discharge in circumstances where such interests are competing. For example, administering the estate in such a way as to benefit one beneficiary may be detrimental to another beneficiary’s interest – the representative must make a prudent decision as to the best course of action, always under the looming threat that he or she may be found in violation of his or her fiduciary responsibility.

In summary, estate administration is an area in which “an ounce of prevention is worth a pound of cure.” Proper estate planning while the individual is alive can help mitigate potential complications and depletion of assets during the estate administration process.