Serving as a Personal Representative: The Good, The Bad, and the Ugly

 

Earlier this year, my brother passed away. Recently, I was appointed by the Surrogate’s Court of Suffolk County, New York as his estate’s personal representative and provided Certificates of Appointment indicating my authority to collect, manage, and distribute assets of the estate.

 

Under New York law, estates with assets under $50,000 are considered “small.” My brother’s estate, with just an $11,363 bank account and about $90,000 of unsecured debts is virtually “micro”… and insolvent (i.e., estate assets are insufficient to pay debts, let alone make any bequests to heirs).

This is the situation that I have been tasked with administering and, needless to say, it has been a huge learning experience. Below are five things I have learned along the way that may be useful if you are ever asked to serve as the executor or administrator (when someone dies intestate without a will) of someone’s estate:

 

Forensic Accounting is Difficult- My brother left little information about his finances and never discussed money with me or his partner of 16 years. Drawing on my CFP® training, there was only one way to begin: a thorough examination of his assets and debts. It took me days to construct a pro forma net worth statement using data from bank and billing statements, a checkbook register, and tax records. Needless to say, his partner and I were both shocked when I finished doing the math.

 

Legal Advice is Necessary- A Long Island lawyer charged the estate a $1,500 fee for small estate legal services. It is well worth the cost to have a legal professional process required court paperwork and advise on process steps and state laws (e.g., the order in which debts are paid and the fact that creditors in New York cases have seven months from my appointment as personal representative to submit claims).

 

Handling an Out-of-State Estate is Manageable- A personal representative has a legal duty to administer an estate according to state law. One of my fiduciary duties was establishing an estate bank account. Living 1,200 miles away from my late brother's New York home, I was worried this would be costly (read: require expensive travel expenses) and/or problematic. Instead it was “easy peasy.” A big gratitude shout out to Bank of America's estate planning division which seamlessly transferred the $11,363 from my brother’s New York bank to the Florida based estate account.

 

Vultures Are Out There- My brother co-owned a house with his partner through a legal titling arrangement known as joint tenancy with right of survivorship. When he passed, the house automatically passed to her as the surviving co-owner. This has not stopped over a dozen vulture realtors and house flippers (to date) from contacting both of us  by mail and phone with offers to buy the house for “quick cash.” Apparently, these vultures scour probate court filings to get data about a deceased person's home address and contact information for their personal representative. Some of the vultures have been exceptionally cruel including one that sent a fake check made out to my deceased brother.

 

Spreadsheets are Your Friend- I created an Excel spreadsheet to manage the distribution of limited estate assets to creditors after the seven-month waiting period (for creditors to submit claims) is over in February. There is now $8,174 left in the estate account after paying the lawyer and reimbursing funeral expenses (the top two priority claims) and a check printing fee. There are also already tens of thousands of dollars of formal debt claims. Since the estate is insolvent, each unsecured creditor will receive pennies on the dollar based on the percentage of their debt claim to the overall debt total. My spreadsheet makes this math very easy and will also serve as a final accounting document to submit to the New York court system when the estate is closed.

There were other learning lessons as well, but I choose not to share them in a public forum. Suffice to say, things that I learned about how estate planning is supposed to take place in an ideal world may not happen with an insolvent estate in the real world. 

Bottom line: If you are asked to serve as the personal representative of someone's estate, know what you are getting into and get assistance from an attorney who specializes in estate planning. Also, you have the right to say "no" by filing formal declination documents. In this case, the surrogate's court will find someone else.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.