If a family member has just died and you are named – or think that you may be named – as a fiduciary, I've written some hints here.
The most important thing to remember is that when you are acting as an executor, you are personally liable for your actions.
A Power of Attorney ends when the principal’s life ends.
This means that if you are acting as an agent under a POA for you father, for example, and your father dies, you can no longer use the authority in the POA to act as your father’s agent.
No further transactions are permitted on behalf of a deceased principal. The person named as executor in the deceased person’s will must qualify and be sworn in as executor before any further business can be transacted.
“But my father has bills that must be paid! How about the funeral director?”
You still have no legal authority to act on behalf of your father or his estate until such time as you have qualified and sworn in as executor.
QUESTION: Who makes the funeral arrangements?
The next of kin of the decedent (the person who died) is entitled to make the arrangements. Funeral expenses are a normal expense of the estate. If the person appointed in the will as executor is not the next of kin, then there should have a clear understanding about the funeral expenses. Consult with me before signing anything. Funeral directors perform a valid and necessary service and are legally entitled to be paid under the terms of their contracts. The executor typically reimburses the next of kin for the cost of the funeral and reception.
Simply stated, if you sign the contract, then you are personally obligated to pay for the funeral. Nobody can bind the estate except the executor.
QUESTION: What rules must I follow if I am named as an executor?
If you are named as an executor you must first qualify as such. This means that you must locate the (original) last will of the decedent, prepare the proper legal documents, and go to the courthouse. You will probate the will at the office of the Register of Wills, where you will also swear to execute your duties properly and lawfully.
As an executor, you are responsible to follow the provisions of the Pennsylvania Probate, Estates & Fiduciaries Code, the Pennsylvania Inheritance Tax Act, the Pennsylvania Uniform Trust Act, the Internal Revenue Code, and the U.S. Treasury Regulations. When you are being sworn in, part of the oath you take states the you will administer the estate according to law. My job is to advise you.
Laymen are not usually familiar with these laws yet are held to a fiduciary standard. Assistance of legal counsel is a must, especially if you are acting in a fiduciary capacity with other beneficiaries involved.
If you fail to do things properly, you can be surcharged by the court and penalized by other government entities.
Do not sign anything.
You should not sign any documents on behalf of the estate without bringing the document to my office for review. Signing documents on behalf of the estate may contractually bind the estate or make you personally liable.
Find the original documents.
It is imperative that the original will and any other testamentary documents (trusts, codicils, etc.) be located and secured as soon as possible after a person dies. Wills are very important legal documents. The destruction of a will is a felony in Pennsylvania.
You are responsible to the beneficiaries. All of them. You also have PERSONAL liability.
Be accountable. Anything that you are doing now on an informal basis will be held to the same standard as when you are acting officially.
Do not start handing out money and property to anybody.
Secure the decedent's property.
Lock the house. Find the car keys. Make sure any valuables are secured and protected.
Leave “Elephant Tracks”.
If you are using your own money to pay for estate expenses, then keep clear records and receipts of everything that you are doing. Keep your cancelled checks, credit card receipts, mileage records, etc. Turn these over to my office for analysis, input into our accounting and tax system, and reimbursement.
Preparation of the Pennsylvania Inheritance Tax Return (PA REV-1500) is the practice of law.
This is not something that commercial tax preparers or even CPAs are authorized to do. It involves knowledge of the PEF Code as well as tax law (the Internal Revenue Code and U.S. Treasury Regulations). As the executor, you are signing the return and are personally responsible for its accuracy. There are severe penalties involved for failing to follow the proper legal procedures and failure to file returns precisely on time, especially a U.S. Estate Tax Return, can result in penalties and interest that are enormous.