The personal representative of a Pennsylvania estate, also known as an executor or administrator, has the legal authority to manage the estate assets. But with this authority also comes the responsibility to preserve the value of the assets for the beneficiaries. Estate representatives have a fiduciary duty to the beneficiaries to ensure that the assets are protected and can be held responsible for depreciation in asset values.
How should an executor manage estate assets?
Clients often ask me what they should do with the estate’s liquid assets during the time of administration but before distribution. For example, should the representative immediately liquidate all of the assets? Should cash be reinvested during a potentially lengthy probate process?
A personal representative can be held personally liable for any diminution of the estate’s liquid funds. This means that if the funds are invested and a loss occurs, or otherwise mishandled, the estate’s beneficiaries or creditors can pursue the personal representative’s own assets through a surcharge action. This can be true even if the deceased left behind stocks and the representative failed to sell the stocks before a decline in market value.
Should the estate’s cash be invested by the personal representative?
My firm has an intense passion for assisting people with an entrepreneurial spirit. I sincerely value and applaud the efforts of those who create and grow small businesses of all types. In the case of a loved one who passed away with a business interest, the business interest often passes through the deceased’s estate. But business interests can present real challenges for the surviving family members and confusion about what should be done.
When a family member leaves behind a business interest, the surviving family often faces questions about the estate’s rights in the business. This uncertainty is completely understandable because the law on this point is complex. It is important for the estate representative to navigate these interests carefully. There are many potential financial and legal repercussions for estate representatives who mishandle the inheritance tax or fail to adequately protect the interests of the estate beneficiaries.
Challenges with Business Interests in an Estate
A loved one who passes away with money or property leaves behind an “estate” to the surviving family. The process of opening the estate and honoring the loved one’s wishes is called probate. Probate begins by opening the estate and appointing an estate representative. The estate is always opened in the county where the person resided at the time of passing. In Pennsylvania, the proceeding is started in the Register of Wills of the county of residence.
A common roadblock occurs when the deceased owned real estate located in another state. For example, it is common for a Florida resident to pass with a second home in Pennsylvania. Family members often assume that the Pennsylvania property can be sold or transferred once probate is opened in Florida. The problem is that the Florida probate court only has jurisdiction to handle the Florida assets. But any real estate located in Pennsylvania falls within Pennsylvania’s jurisdiction. This means that the Florida proceedings cannot handle the deceased’s real estate in Pennsylvania.
Ancillary probate is important because real estate cannot be sold or transferred until an estate is opened. Even if an estate is opened in the county of passing, the ancillary estate is still required to transfer the out of state property.
How Does Ancillary Probate Solve this Problem?