One of the toughest decisions in estate planning is selecting an estate administrator because once appointed, they are difficult to remove. Think hard through these considerations before selecting the individual or team who will settle your estate.
There is no treasure map in settling an estate where a simple X identifies the spot for rightful heirs to go and walk away with the assets of a lifetime. Instead, finding assets left behind by an individual can be like a puzzle, or more to the truth, a maze where each twist and turn can reveal the hint of an asset long hidden, forgotten or unaccounted for in an organized manner for those left behind.
But all estates must be settled. When a person dies, their possessions–real estate, business interests, money, investments, personal belongings, other–are bundled together into an estate, along with any outstanding liabilities and taxes, with the balance distributed to the heirs of the estate. When no heirs are identified by the will, the remaining assets will be distributed by the intestacy laws of the state.
Who gets what is often complicated by what is found, and this is where estate administration can get really interesting. Stray cash found in envelopes taped to the back of business files. Stock certificates crammed into musty boxes in an office. A coin collection in a crawl space found below a trap door in a bedroom closet. And, yes, even cash in mattresses are all hard evidence that assets exist.
More confounding to unwind is the asset trail left by letters, emails and computer hard drives that may mention the existence of property holdings in other states and investment accounts in various institutions. It is only by digging into the details that property holdings and accounts can be found and accessed or dismissed as closed out.
It is the job of the personal representative (i.e., estate administrator) to get to the bottom of these asset trails by sorting through the details of a life and sifting through pages of loose paper and computer files detailing personal letters, bank statements, and insurance documents before the assets can be validated and properly distributed to the rightful heirs.
The administrative process includes cataloging assets, identifying where they are being held and who is managing them, figuring out how to gain access to the assets, whether those assets are being housed by a financial institution or located in Uncle Harry’s back barn, all before an action plan can be put in place to point and deliver assets to the individual(s) or entities assigned in accordance with the will or state law.
Assigning a Professional Fiduciary
In situations where a person does not want to saddle family and friends with the hard task of administering their estate, a professional fiduciary or corporate fiduciary can be selected to serve as personal representative.
Likewise, an appointed personal representative may hire a professional fiduciary to assist the personal representative in the administrative process. An added benefit of using a professional fiduciary is that the professional can take on the duty of running interference when issues become sensitive or the asset map is complicated or even non-existent.
Where there is no will and sizable assets at stake, the process can be protracted and messy—think Prince’s estate in Minnesota—resulting in a heavily manual process of sifting through belongings to identify items of value among notes, bank statements, debt records and property holdings. These items are then organized, valued, reconciled and set aside according to the decedent’s wishes.
Just how messy an estate is to settle depends on the size of the estate and what’s been done ahead of time to reduce complications. This could include mapping out the existence of assets—who, what, where, when, why and how—as part of pursuing an estate plan.
Updating these documents is necessary to ensure that the details for each asset remains current, including the details on how to gain access to those assets (i.e., bank names, login information, balances, other). Response times during COVID-19 at financial institutions has been delayed so access codes and login details have been particularly useful in estate administration. Complications in settling an estate may require engaging further forensic help, such as auditors and computer experts, to identify and uncover the details surrounding assets.
Where the property and the personal representative is located can further muddle estate administration. If an estate holds rental property in Colorado but the personal representative lives in California, a management company might need to be engaged to ensure tenants and property are being taken care of while estate matters are settled.
Selecting a Personal Representative
One of the toughest decisions in estate planning is selecting a personal representative because once appointed, it is difficult for the estate beneficiaries to remove the personal representative. In thinking through who will, or should, be assigned the job of executing an estate and disbursing assets, consider:
Reducing Litigation Risk
In estate planning, there is commonly an assumption that family and friends will play nice. But the sad truth is the family dynamics at the time an estate plan is drafted may not be the same dynamic at the time the plan is executed.
Situations may crop up from a sister-in-law who creates family discord or a brother who angles for a bigger piece of the asset pie. It is at these times that the arms-length of a professional fiduciary are particularly valuable.
An estate planning attorney should address the potential of disputes with you and should also attempt to obtain information from you regarding your family dynamics. When this information is shared, an estate planning attorney can make proper recommendations about who you should consider when choosing your personal representative, estate administrator and professional fiduciary.
Dylan Metzner is a private wealth attorney with Denver-based Jones & Keller executing advanced trust and estate planning strategies for individuals, families and businesses. Reach out to Dylan at firstname.lastname@example.org.
This information is not intended as legal advice. Readers should seek specific legal advice before acting with regard to the matters addressed above.