Often a child or family member of an individual who has recently passed away will consider tackling the estate administration process without hiring an estate attorney. Whether it is the cost of retaining counsel, or the “do-it-yourself” personality, some individuals believe that hiring a probate lawyer is an unnecessary expense which can easily be avoided. The truth is that there is no legal requirement to hire a lawyer, and there are many individuals who have successfully navigated the probate process without counsel. All too often, however, an executor will find themselves stuck, or worse yet, trying to correct a mistake that could leave them personally financially liable.
The personal representative (executor or administrator) is in charge of administering the estate or “probate” which is the court monitored process of gathering and distributing the assets according to state law and the decedent’s will. The personal representative is a fiduciary, meaning that they are held to the highest standards of loyalty and care that the law provides. Even in the most friendly and simple of estates, a personal representative can be faced with serious decisions regarding estate assets and debts. If the personal representative fails to comply with Pennsylvania law, or is negligent in the administration, they can be held personally liable.
There are some common elements to estate administration which are often overlooked by unrepresented individuals, which can have serious consequences.
1. Failing to adhere to the proper steps, practices, and procedures.
Administering an estate in Pennsylvania requires the following of very specific procedures which must be adhered to regardless of the size or type of estate. Missing a step or completing something improperly can be a serious problem. Failing to properly advertise the estate could lead to creditors filing claims long after the administration process has been completed, failing to check for a claim with the Department of Human Services, or failing to properly notify all beneficiaries are also common missteps.
2. Mistakes on the Inheritance Tax Return.
One of the largest expenses in Pennsylvania estate administration is often the Inheritance tax which ranges from 4.5% to 15%. Missing deductions, missing the pre-payment discount, or overstating the tax due can cost thousands in unnecessary expenses.
3. Mismanagement of Assets.
As the personal representative of the estate, the executor is required to marshal, secure and protect all estate assets including assets which may increase or decrease in value such as real estate or stocks. Failing to check with an insurance carrier on a now vacant home, or failing to immediately liquidate a stock before it potentially loses value, can lead to personal liability for negligence.
4. Improper Accounting
The personal representative is required to create an accounting of all estate assets setting for the value and listing all administration expenses and valid debts of the decedent. If the accounting is not properly prepared or is incorrect, a beneficiary may raise the issue with the probate court. If the executor lacks the proper documentation for assets or expenses, her or she could face a claim for damages.
5. Failing to Secure Releases or a Family Settlement Agreement from all Beneficiaries.
Because the personal representative is potentially liable, it is essential that the beneficiaries release the executor from any liability after they have been apprised of the final estate accounting. This will protect the personal representative in the future if one of the beneficiaries decides they were unsatisfied with any part of the administration of the estate.
While the do-it-yourself method to probate without a lawyer can be tempting to save money, the savings in legal fees is often outweighed by the stress, potential liability, and the common mistakes and pitfalls which an executor may run in to.
If you or a loved one is facing the possibility of being appointed as a personal representative, consider contacting our probate lawyers in Harrisburg, PA for a free consultation.