Connecticut Trust and Estate Administration
The administration of an estate or trust is very important and can often be overwhelming for an inexperienced person. The Executor or Trustee (fiduciary) has the responsibility of not only carrying out the directions contained within the document but also complying with the numerous tax and other filing requirements. An innocent mistake at any step along the way could have a substantial impact on the beneficiaries as well as the Personal Representative.
The following is a brief overview of the responsibilities and duties of the appointed Personal Representative. It is intended as a general guide only and not as legal advice. The Personal Representative should consult with a qualified estate planning attorney before taking over, in order to assure that he or she complies with all legal requirements and properly carries out the directions given by the decedent in his Will, Trust, or other estate planning documents. An attorney that is a general practitioner or who does not focus his or her practice in this particular area of the law may innocently mishandle critical issues. It is important you utilize an attorney dedicated to this area of the law with the experience to spot potential problems and minimize your liability exposure.
In general, all Personal Representatives face similar duties and responsibilities, regardless of the size of an estate. All steps in the administration of the estate or trust are more or less directed toward three goals:
- Collection and management of assets;
- Payment of debts, taxes and expenses; and
- Distribution of the balance of the estate assets to the named beneficiaries.
It may seem simple when boiled down to three bullet points, but it can be much more complicated than it appears. For example, let's consider the straightforward concept of distributions to beneficiaries.
It is your responsibility to ensure that each beneficiary receives their proper distribution based on the terms of the document. It is generally considered advisable that an administration accounting detailing every transaction be prepared (even if it is not required) and balanced in order to document the accuracy of the distributions. This accounting is typically based on fiduciary accounting definitions for principal and income rather than the traditional tax concepts of principal and income that most people are familiar with. In addition, it is generally considered good practice for the fiduciary to obtain a receipt and release of liability from each beneficiary when distributions are made. This is for the protection of the Personal Representative.
Once the numbers are determined, how are distributions to be made? Perhaps there is a tax issue that can be avoided or mitigated by handling the distributions in a certain way. Perhaps one or more of the beneficiaries have liability concerns such as divorce, back taxes, or an accident and would benefit from having their distribution held in an asset protection vehicle. Is the beneficiary receiving government benefits and would the distribution have a negative impact on them?
These questions are just the tip of the iceberg and there is no easy, universal answer to all of them. You are a fiduciary as the Personal Representative and you risk personal liability for your actions.
