The following is a draft letter sent from a Florida probate lawyer to a client who is serving as the Personal Representative. The letter sets forth the duties and responsibilities of the Personal Representative in Florida Probate.
As personal representative of an estate in Florida, you should be aware of your duties and responsibilities. The functions described here are often referred to under the term “settling the estate.” The process of settling the estate is a legal process, and as your attorney, I will counsel and advise you.
STARTING THE PROCESS
The process of probate, or administration of the estate, or settlement, depending upon the term you prefer, begins with the preparation and filing of a petition for administration, and after various procedures which are my responsibility, the Judge will sign Letters of Administration, copies of which you will receive. The Letters of Administration are evidence of your legal authority to act as personal representative. The Letters of Administration may be enclosed with this letter or you may receive them soon.
Once the administration procedure has begun, it will pass through several stages. The first stage of the administration, after the Letters of Administration are issued, is giving notice to those persons who are involved or interested in the estate. Beneficiaries of the estate will receive the required notice by certified mail unless they sign waivers.
Once the Letters of Administration are in hand, a useful first step is to redirect the deceased’s mail to your address using a change of address form at the post office.
TAXPAYER IDENTIFICATION NUMBER
Probate Estates require a taxpayer identification number; therefore we can obtain one for you, if you wish. You will use this number to open the estate account at the bank. In order for us to obtain a TIN (or sometimes called EIN) for you, we will need your social security number. Otherwise, you can obtain an EIN by going online to IRS.gov and locate ‘Apply for an EIN online’, then click Apply Online Now. Simply follow the online directions.
For the period of the administration of the estate, you are entitled to possession and control of all of the assets of the estate. Your duty is first and foremost to protect and preserve the assets. Therefore, the next stage of administration involves identifying, collecting, inventorying, valuing, securing and investing the assets of the estate. Most custodians of assets will require that you produce Letters of Administration before allowing you to control or remove assets. Some will also require a death certificate. We will work with you to assist you in dealing with asset custodians who may have issues or questions regarding your authority.
If the decedent owned a vehicle, do not drive it. The estate could be liable for any damages caused by the driver; therefore, wait until the vehicle is transferred to the rightful heir before it is driven.
An important part of making certain that assets are secure is arranging for adequate insurance coverage for tangible personal property or improved real property. A list of all of the assets and their values must be filed with the court in the form of an inventory, and, if the estate is of a size sufficient to require the filing of an estate tax return, similar information must be provided for the state of Florida and for the Internal Revenue Service.
Throughout the estate proceeding, management of the assets is an important concern of the personal representative. Management of the assets includes investment of the assets, whether in bank accounts, government bonds or other prudent forms of investment, to the extent that the estate has excess cash. A further and important consideration is liquidity management. The personal representative is required to sell assets or borrow money on behalf of the estate to meet the cash requirements as they arise, if cash available to the estate is not otherwise sufficient. Cash requirements of the estate include the payment of creditors, payment of expenses of administration and the payment of taxes. Be sure to keep a record of all transactions and keep all bank statements. If the deceased had a primary residence in Florida, the Personal Representative may, but is not required to, take custody of the residence and secure it.
You may continue to receive government checks or pension checks after the date of death of the decedent. Do not assume that these are estate assets. You may need to return these funds to the payers. It may take several months for these payments to stop.
As your attorney, I will work with you in preparing a formal inventory and preparing the necessary documents that need to be filed. Please provide statements from the source (i.e. bank institution) with the date of death value to be included on the Inventory, within 30 days of your appointment as personal representative. The deadline for filing the Inventory is 60 days from your appointment as Personal Representative. You will need to get documentation from the source as to the date of death value along with the bank statement. We will prepare the Inventory for your signature upon receipt of the statements from you.
One of the duties as Personal Representative is to keep track of all assets of the decedent and keep a record of all transactions pertaining to the estate account and the assets of the decedent. An accounting is required on all formal probate administrations unless it is waived by all interested persons. Therefore, keep all bank statements for the estate; proof of all accounts that were closed – showing the amount closed and ultimately transferred to the estate account; copies of all checks written from the estate account; and copies of all checks consisting of deposits made to the estate account. Keeping detailed records will make the preparation of the accounting efficient and keep the cost of preparing the accounting at a minimum. Having our firm track down missing statements, copies of checks, verifications of deposits and other missing information greatly increases the cost of preparation. You must keep receipts for all expenses. If you do not, you may be personally liable for expenses. It is strongly recommended all payments be made by check with an adequate description in the memo line.
Almost every estate has creditors. For example, the power company and the telephone company are creditors to the extent that the bill incurred during the month of death was not paid (or even received) as of the date of death. Also, the funeral home is a creditor to the extent of services performed. There may be additional estate creditors. However, except for the funeral claim, claims are limited to amounts that were owed by (even though not yet billed to) the decedent as of the moment of death. It is easy to understand this by assuming what the decedent would have paid if death had not intervened. Debts that are incurred after death in connection with the estate administration are not included in this category and are handled in another manner.
One very important duty that the law requires of you is to determine the name and the address of each creditor in existence as of the moment of death. By simply having the mail forwarded, you will receive all the bills. But, many times there are creditors who do not send bills. You must make a “diligent search” of all available sources to determine the creditors. Attached to this letter is a 10 point checklist of procedures that may be followed to determine the creditors.
Once the name and address of the creditors are determined, one of two things must be done. First, for small and ordinary debts (for example, the power company’s final bill) we can list such items on a Personal Representative’s Proof of Claim, which states that you intend to pay these items. For all other items, you are required to notify the creditors of the requirement of filing a claim. This is accomplished by sending a copy of the Notice to Creditors to each creditor. When you receive a bill, forward it to us or make a detailed list of the bills with account numbers, addresses, phone numbers, so we can send a copy of the Notice to Creditors to the creditor. If you send the bill to us, you may want to keep a copy of the bill for your records. When you furnish us with the list or copy of the bill, we will see to this notification on your behalf. It is, however, your responsibility to make a diligent search to determine a complete list of creditors and to furnish us with that list or send us a copy of the bill.
You must accomplish this promptly because the legal notification must be sent to the creditors within 60 days after your appointment as personal representative. Receipt of this notice by the potential creditor (with some minor exceptions) allows them only 30 days in which to file the claim or be barred by law from collecting the amount from the estate. If we fail to send the notice to the creditors within the time allowed, this will have the result of extending the time in which they may file their claims against the estate. It is in the best interests of all who are interested in the estate that we end the creditor’s filing period as soon as legally allowed.
We are also required to prepare a statement under oath for your signature that you have conducted such a diligent search, and entered on the statement will be the result of that search.
As Personal Representative, you may be required to file tax returns and pay taxes for the estate. There may be many required tax returns; however, the most common are income tax returns for the decedent, which may not have been previously filed and income tax returns for the estate if the estate will likely have income in excess of $600 during its tax year. You will need to hire an accountant or tax preparer to handle the final income tax return of the deceased prior to death and to prepare income tax returns for the estate. We do not typically prepare income tax returns.
For estates where the total taxable value exceeds $5,340,000, an estate tax return will need to be filed. Our firm typically prepares the estate tax return.
DISTRIBUTION OF THE ESTATE
After expenses, including taxes, have been paid, the next stage of the administration is the procedure involving distribution of the estate to the beneficiaries. As your attorney, I will review the applicable dispositive direction and will advise you of the provisions of the law that apply in order to identify the persons who are properly beneficiaries of the estate and who are entitled to distribution. You will then calculate the distributive shares after the deduction of any taxes attributable to each share.
Distribution of the assets of the estate then occurs to the persons entitled, sometimes by distributing the assets directly in satisfaction of a bequest, and other times by selling those assets and converting them to cash, and then distributing the cash.
CLOSING THE ESTATE
The final stage of the estate is closing out the probate. In this procedure the court enters its order discharging you as personal representative after your duties have been completed. In order to accomplish the estate closing, it is necessary to report to the court on all legally significant activities which occurred in the estate and to furnish evidence that the creditors have been paid and that certain taxes have been paid, and that the remaining property has been distributed to the persons entitled to that property in proper shares. When this evidence has been presented in proper form, which is again my legal responsibility, the Judge will sign an order which discharges you as personal representative and terminates your obligations with regard to the probate. The final stage of this procedure is that it is your responsibility for the filing of any final income tax return that the estate is obligated to file for the year in which the final settlement occurs. It should be remembered when the estate is closed that the estate may have had taxable income for that year or otherwise be responsible for the payment of taxes, and sufficient funds must be retained by you in order to enable you to pay those taxes that might be due.
It is difficult to predict with precision how long it will take to probate this estate. Many factors impact on the answer. By state statute, a Florida probate estate must be closed within twelve months after it is opened unless the Judge grants special permission for an extension of time. Extensions are only granted for good reason. Good reasons to extend the time include such things as pending litigation by or against the estate, liquidation of assets for distribution, disputes with taxing authorities and similar matters either out of the personal representative’s control or that would work a disadvantage upon the estate if time were not extended.
In Florida, a personal representative is classified under the law as a “fiduciary.” A fiduciary is a person who has been selected for a position of special faith, trust, and reliance. A “trustee” is another type of fiduciary and the duties and responsibilities which you have in the settlement of this estate are quite similar to the duties and responsibilities that a trustee would have.
As personal representative of the estate, in accepting that office and that trust, you also agreed to be personally responsible financially for certain matters. Initially, of course, you have personal responsibility for proper administration, investment, and subsequent distribution of the assets of the estate. As I pointed out earlier, should you fail in this duty you may be sued by any person who has been injured by your failure. More important, however, is certain hidden liability which you have assumed, and of which you should be aware, for the payment of various taxes that were owed by the decedent or that may subsequently be owed by the estate. Upon the failure to pay these required taxes, the law permits the Internal Revenue Service, and in some situations, the State of Florida, to collect the taxes from your own assets. Those would include the right to freeze your personal bank account or place liens on real estate or other property that may belong to you personally. This, of course, occurs only if you fail to pay taxes from the estate that are required to be paid by you in your capacity as personal representative.
The persons to whom you owe these duties are, first, any creditors of the estate, and second, the beneficiaries of the estate. If your duties are not properly or competently performed, you may have to answer to any of these persons who have been harmed as a result.
You will be furnished with copies of the papers you sign so that you may create a file of your own. Most clients find it useful to set up a file at the beginning for the estate and to keep all the papers in one location.