Responsibilities of a Personal Representative of an Estate

Responsibilities of a Personal Representative of an Estate

A personal representative of an estate (PR) is tasked with several key responsibilities. These duties include gathering the decedent’s assets, settling outstanding debts with creditors, and distributing assets to beneficiaries. Additionally, a personal representative of an estate is responsible for filing tax returns and ensuring any owed taxes are paid.

State Law

Under state law, a personal representative is the person appointed by the court to administer an estate. They can be either executors (appointed when a will exists) or an administrator (appointed in the absence of a will). A personal representative nominated in a will has no authority over estate assets unless appointed by the court. The court grants an individual authority through Letters Testamentary (called Letters of Administration or Letters of Representation in some states). This authority allows them to manage the deceased person’s tax matters and other estate-related affairs.

No Court-Appointed Representative

When there is no probate and no appointed representative, the IRS permits a “person charged with property of the decedent” to file the decedent’s tax returns and claim refunds. If there is a surviving spouse, he or she usually files a joint final Form 1040 and any other required returns. If there is no surviving spouse, the person is commonly:

  • The trustee of the decedent’s revocable trust.
  • The personal representative nominated in the will who would have been appointed if probate was required.
  • A beneficiary receiving non-probate assets who undertakes the work.

The IRS uses the term “personal representative” to refer to anyone filing for decedent, regardless of whether they are court-appointed.

Specific Duties of the Personal Representative of an Estate

The specific duties of a personal representative depend on the estate’s size, complexity, and state laws. In general, you will work with the estate’s attorney, the decedent’s family, and other parties. Common tasks include obtaining important documents like the will, identifying beneficiaries, securing an Employer Identification Number (EIN) for the estate, and managing financial accounts. PRs also oversee the notification of relevant parties on the passing of the decedent, such as the Social Security Administration, insurance providers, and employers. They are responsible for asset valuation, bill payment, and protecting assets, including maintaining insurance coverage on the decedent’s properties.

Furthermore, PRs must notify creditors, compile an inventory of the decedent’s assets, and prepare a final accounting for approval by beneficiaries and, if necessary, the probate court. The estate can be closed after receiving estate tax clearance and distributing assets to beneficiaries.

Decedent’s Tax Returns

A personal representative of an estate is responsible for the following tax returns when required.

  • Form 1040. Final tax return for the year of death (gross income of a decedent from January 1 until the date of death is reported on the decedent’s final income tax return).
  • Form 1041. Income tax returns for the probate estate (required if income greater than $600 is received after death by the decedent’s estate).
  • Form 706. Estate tax return [required if decedent’s estate exceeds the estate tax exclusion ($12,920,000 in 2023) or if a portability election is made].
  • Form 709. Gift tax for the year of death [required if the decedent gave more than the annual exclusion ($17,000 in 2023) to any one person in the year of death or failed to file any prior year gift tax returns].
  • Returns not filed by the decedent for prior years.
  • State income tax and estate tax returns

The personal representative may be personally liable for unpaid taxes, so diligence in tax matters is crucial.

Noteworthy Forms

Notice of Fiduciary Relationship

To establish the fiduciary relationship with the IRS, PRs should file Form 56. Form 56 can also be used to notify the IRS of a change in the fiduciary or termination of the fiduciary relationship.

Prompt Assessment

Form 4810 can be submitted to expedite the assessment process for tax returns from three years to 18 months. Prompt assessment can be requested for estate income tax and individual returns, including returns filed by the decedent. Prompt assessment cannot be requested for federal estate tax.

Discharge from Personal Liability

By filing Form 5495, you can request discharge from personal responsibility for estate, gift, and income tax after returns are filed. The personal representative is discharged from personal responsibility nine months after receipt of the request by the IRS unless unpaid taxes are involved.

The role of a personal representative in estate matters encompasses a multitude of responsibilities, with tax matters being of significant importance. Our team of expert trust and estate accountants at Innovative CPA Group is well-versed in these matters, ready to provide you, as a personal representative, with the guidance you need to ensure compliance and make informed decisions. Don’t hesitate to reach out for a free consultation—we’re here to help.

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2023-10-25T13:43:30+00:00September 7th, 2023|Estates and Trusts|

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