In Alaska, a Personal Representative is the person who represents the estate. In many states, this person is called an "Executor" or "Executrix." The Personal Representative has the authority to sell a decedent’s assets, pay creditors’ claims, make distributions to heirs, and generally manage an estate.
The role of Personal Representative is a very serious role, with many legal responsibilities and obligations. In almost every situation, a Personal Representative should engage the services of a qualified probate attorney to help him or her discharge his or her duties and to properly complete the probate process. Some of these duties are outlined below.
The Choice of Personal Representative
If the decedent left a valid will, then the person appointed as Personal Representative in the will is the person with legal authority to represent the estate. If there is no will, then Alaska Statutes provide for a hierarchy of authority, beginning with any surviving spouse.
The Duties of a Personal Representative
Fiduciary Duty: A Personal Representative (PR) has a fiduciary duty to all interested parties of the estate including heirs, devisees and creditors of the estate. A fiduciary duty is the highest duty recognized by law and can be summarized as requiring the PR to act in a way that is in the best interest of all of the interested parties, not just in the best interest of the PR. Frequently, the PR is also an heir or devisee of the estate. When the PR stands to benefit from the estate, this dual role may be hard for the PR and other interested parties to understand. A good PR will put the interest of everyone else ahead of their own interest.
Holding and Titling of Estate Assets: It is important for the PR to understand that assets of the estate cannot be held in the personal name of the PR. Assets should be held in one or more accounts titled in the name of the estate, such as “ESTATE of EDWARD SAMPLE.” Moreover, it is inappropriate for a PR to commingle assets of the estate with his or her own assets or to use the assets of the estate for his or her personal benefit before distributing assets to heirs and devisees.
Locating and Preserving Assets: The PR is responsible for locating and preserving assets of the estate until they are distributed to the heirs, devisees, and creditors. The PR is required to prepare an inventory of assets of the probate estate and must provide a copy of the inventory to interested parties upon request. Distribution of estate assets is governed by the terms of the will and by Alaska Statutes.
Itemized Accounting of Income and Expenses: In most probate cases, it is necessary for the PR to provide the court and interested parties with at least a basic accounting of estate income and expenses during the period of administration. This accounting is usually necessary in the preparation of income tax and estate tax returns. Some probate cases are sufficiently complex that it is prudent for the PR to engage the services of an accountant to assist with preparation of the accounting as well as income and estate tax returns.
Paying Valid Debts and Expenses of Administration: Certain costs and expenses related to the probate administration must be paid as they are incurred. Other expenses should not be paid until the Creditor Claim period has expired and a plan of distribution has been proposed. The PR needs to keep a careful accounting of estate expenses incurred and paid. Valid expenses of the estate may include:
- Legal and accounting fees
- Personal Representative fees
- Expenses to protect and collect property, including storage costs, insurance, mortgage payments, association dues and utilities
- Reasonable and necessary transportation for the Personal Representative
- Sales commissions on real estate sales
Debts of the Estate Incurred Prior to Death and Creditor Claims: The PR is responsible for determining and paying creditors claims. Legitimate debts incurred by the decedent prior to death include expenses of the last illness, credit card charges, car loans, real estate mortgages, personal loans or pending lawsuits. These debts may eventually have to be paid from the estate assets, but do not have to be paid immediately. The Alaska Statutes provide a procedure for the PR to give notice to potential creditors, allow a claim by a creditor, or contest a creditor claim. See Creditors & Creditor Claims for more information.
Compensation for the Personal Representative: The PR of the estate is entitled to reasonable compensation for the time he or she spends working on behalf of the estate. In addition, the PR is entitled to reimbursement for probate costs and expenses incurred during the administration. The issue of PR fees can become an area of dispute with other heirs and devisees of the estate. It is important for any PR to keep track of the time he spends handling estate affairs in order to document the reasonableness of the PR fees. Some PRs choose to waive their right to payment of fees.
Sale or Distribution of Property: The PR may sell or distribute property during the time of administration. Some items of property may be directed to a specific person under the Will. Distribution of personal property can sometimes cause disputes when children or heirs cannot agree upon a fair division of the personal property. The PR is ultimately responsible for making this division or selling the personal property and distributing the proceeds of sale.
Income and Estate Tax Returns: The PR is responsible for filing income and estate tax returns. Failure to file tax returns for the estate could result in personal liability of the PR for the taxes. The first tax return due is the final income tax return for the decedent (Federal Form 1040) for the portion of the year that the decedent lived. If the decedent earned money in a state that has a state income tax, a state tax return must also be filed by the PR.
If the probate estate earns income in excess of $600 during the period of administration, the PR must report that income on what is known as a fiduciary income tax return (Federal Form 1041). The estate may also be required to file an estate tax return with the IRS known as Form 706, as well as state death tax returns if the decedent owned enough property in a state that has a state death tax. Alaska does not currently have an income tax or an estate tax.
Lawsuits and Taking other Legal Actions: The PR is responsible for bringing and maintaining any legal actions or lawsuits on behalf of the estate.