Trust Administration
Duties of a Personal Representative or Successor Trustee.
Summary duties of a Personal Representative or Successor Trustee in Hawaii. Please see below.
1. YOUR TITLE:
After being appointed by the Probate Court, your title will be "___________________, Personal Representative of the Estate of ____________________________, Deceased.”
This is the name you should use on all documents for each Estate. If it is too cumbersome, you can abbreviate your signature as "___________________, Personal Representative", and you can abbreviate bank accounts and other items to: "The __________________________Estate”
2. YOUR EVIDENCE:
When you are appointed, you will be issued Letters of Administration (if there is no Will admitted to probate) or Letters testamentary (if there is a Will admitted to probate). We will give you a few certified copies (i.e., copies with a Court seal) of this document for your own use. It is the evidence that you have the power to act as Personal Representative, and you will be giving these copies to those with whom you conduct Estate business for the Estate. If you need more Letters or updated Letters, let us know and we will request more copies from the Court for you.
3. YOUR ADVISERS:
As Personal Representative, you have the authority to hire advisers for the Estate. Your attorneys are the most obvious ones. In addition, you can retain stock brokers, investment counselors, tax professionals, and other advisers. The cost of hiring these people is charged against the Estate's assets.
You should pick your advisers carefully. Be sure they are qualified in their fields, that they work quickly, that they account to you regularly for their actions, and that they discuss their fees with you in advance. Your advisers can be of great help to you in administering the Estate. However, you are ultimately responsible if anything goes wrong.
We have attached a checklist of some of the things that you will need to complete as personal representative for the Estate.
4. YOUR COMPENSATION:
As a Personal Representative, you are entitled to be paid for your services to the Estate. You are entitled to “reasonable fees” for your work, which normally is comprised of two components: a fee on income, if any, and a fee on principal. If you are a beneficiary of the Estate, it may not be to your tax advantage to pay yourself a fee, which would be taxable income to you. If you intend to take a fee, please ask us for guidance as to the calculation of the amount(s) that may be charged. The principal fee is usually paid at the end of the probate proceeding or in increments during the administration. The income fee is taken as it is earned, usually quarterly. In addition to the “normal” fees, you and this firm are entitled to extraordinary fees for work beyond that normally required on a Probate. For instance, if you prepare the Tax Returns or spend a lot of time helping in their preparation, you are entitled to a reasonable fee for your time. If you sell, lease or manage real property or defend a suit against the Estate, you may also be entitled to extraordinary fees, but the Judge will usually require the approval of affected beneficiaries. You will have to file an Affidavit to support your claim, so keep good records.
5. YOUR TAXES:
As Personal Representative, you are responsible for the following tax returns:
A. The Decedent's final Income Tax Return.
B. The Estate's Income Tax Returns.
C. The Death/Estate Tax Returns.
D. General Excise Tax Returns.
You must prepare and file a Decedent's Income Tax Return for the years in which The Decedent died. You must also file a Tax Return for the year before death, if The Decedent did not do so. To notify the IRS that you are the Personal Representative of the Estate, you should file IRS Form 56 (available from the IRS). When the Estate is ready to close, you must again file a Form 56 to let the IRS know that you are no longer serving as Personal Representative.
The Estate is its own tax entity. An Employer Identification Number (like a social security number) is required. This office will obtain an EIN for the Estate.
You must annually file a Form 1041, Fiduciary Income Tax Return, for each Estate. Annually does not necessarily mean on a calendar-year basis. You have some choice in setting your own year for tax purposes. Check with your accountant or attorney for help.
There are two primary Estate Tax Returns for you to be concerned about: A Federal Estate Tax Return (Form 706) and a Hawaii Estate Tax Report (Form M-6). These are due nine (9) months from the date of death. You may or may not have to file Estate Tax Returns, depending upon the size of the Estate. Estate taxes are assessed on all property in which the Decedent had an interest, including solely-owned property, jointly-owned property, life insurance, retirement plan proceeds, cars, clothing, jewelry, art, china and furniture. You must establish values and defend them before the IRS, so appraisals are strongly recommended. It is less expensive and time-consuming to obtain an appraisal early than it is to defend your guesstimate value later.
If the Estate has business assets, such as rental property, a General Excise Tax should be assessed and collected and a Return filed with the State. Check with your local Tax Office for forms and licenses. The preparation and filing of all these Tax Returns that you are responsible for is not an easy task or one to be taken lightly. You should probably have a competent accountant or tax professional to help you with the various Returns. YOU ARE PERSONALLY LIABLE if the Returns are not filed or are incorrect. The IRS has an arsenal of penalties and powers to make life uncomfortable for you if something goes wrong. So be careful!!
6. YOUR INVENTORY:
One of the first duties you have as a Personal Representative is to locate, identify, secure, and value all of the Probate assets. "Probate Assets" are those assets of which the Decedent was the sole owner or a tenant-in-common. Life insurance policies or retirement plan proceeds which do not have a named beneficiary may also become Probate assets. Joint bank accounts, joint tenancy property, tenant by the entirety property, life insurance with a named beneficiary, and many other assets are non-Probate property, but you must still identify all of it to properly prepare the Estate Tax Returns and determine liability for claims.
The Inventory should be prepared and filed with the Court as soon as possible after your appointment; the Order will specify that it be filed within thirty (30) days. Each asset of the Estate must be properly and fully described, with any encumbrances (mortgages, liens, etc.) noted, and a value assigned. It is best that you have a professional appraiser prepare written inventories of real and personal property. A stock broker can give you valuations for stocks and bonds. All values reported should be as of the date of death.
When you have prepared the Inventory, give it and all evidence of the valuations to us and we will prepare it in proper form for the Court.
If you are unable to obtain enough information to value an asset, please notify us immediately. If you have reason to believe an asset is not worth anything, note that. You can always amend or supplement the Inventory later if the valuations change or new assets are discovered.
Remember: The Inventory lists only Probate assets (assets owned in the sole name of the decedent, such as a house or bank account in their sole name), not non-Probate assets (such as a house or bank account jointly owned in the name of the decedent and a living joint owner, or a life insurance payable to a currently living person, etc.)
7. YOUR POWERS:
As Personal Representative, you have control over the Decedent's property just as an individual would have over her or his own property. Your Court-Appointed Letters are proof of your power. But there are a few restrictions.
8. YOU ARE A FIDUCIARY:
This is a special relationship under the law. You owe a duty to the creditors and beneficiaries of the Estate and to the government to exercise care in what you do. Although you can undertake most actions without prior approval, you must discuss with this office regarding the sale of any property, particularly real property. It is a good idea to check with the beneficiaries of the Estate prior to undertaking any major change in assets.
Act prudently. Deal with the assets as most business people would deal with their own - conservatively. If in doubt, check with your attorney and beneficiaries.
9. YOUR LIABILITIES:
When the Petition seeking your appointment is filed, we will publish a notice in a newspaper to creditors and anyone else who might have an interest in the Estate. Creditors have four months from the date the notice first appears in the newspaper to present you with claims. During this "creditors' claim period", you should review any bills that come in, determine if they are legitimate, and PAY THEM ONLY IF THE ESTATE IS DEFINITELY SOLVENT. IF THE ESTATE IS NOT SOLVENT, THEN DO NOT PAY ANY CREDITORS AS THAT WILL POTENTIALLY MAKE YOU LIABLE TO ALL CREDITORS - EVEN IF THE CLAIMS EXCEED THE TOTAL VALUE OF THE ESTATE. Please forward all bills to this office for our review. If you question a bill, check with us, because you must follow special procedures. If you have knowledge of any creditors of the Decedent, you must contact them and inform them that they must present their claim to you.
THIS OFFICE WILL DRAFT THE NOTICE TO CREDITORS LETTERS.
Once the creditors' claims period expires, any bills which arose prior to the Decedents’ (your parents) death that were not presented during this period are barred and need not be paid. If you feel that a bill should be paid, even though a claim is not submitted or if submitted late, consult with your attorney and the beneficiaries to get approval. If a secured interest claim is filed during the creditors' claims period, you may be liable if you don't take every action possible to safeguard the secured property and make sure payments are made on time.
Personal liability is the key concern. This means that you would have to pay out of your own pocket instead of paying from the Estate's assets. This will only arise if you waste assets or distribute or otherwise dispose of assets before claims are satisfied. So no distribution should be made to beneficiaries prior to the close of the creditors' claims period without being absolutely certain you have enough assets to pay claims.
Taxes are another matter. You are personally liable for each Estate's Income and Estate Taxes for a period of three years after filing in the event an audit results in changes. Your attorney can tell you how to shorten that period to 9 or 18 months in some instances. Since you may have to pay for any errors, you must be careful.
Finally, if you waste or mismanage assets, the beneficiaries could petition the Court to "surcharge" or penalize you. Again, it would come out of your pocket. So get beneficiary approval for questionable actions.
10. YOUR BANK ACCOUNTS:
You should open bank accounts in the name of the Estate. The names on the accounts should be "__________________, Personal Representative of the Estate of ______________________________________________________, Deceased.” Normally, you must open a checking account (so you can pay bills) for each Estate and you can open a savings account for each Estate if you feel that there will be more cash available then needed for bills. The financial institutions will need the Estate's Employer I.D. Number (see Paragraph 5 above) to allow you to open the account and to report interest earned to the IRS. If you don't have one, let the financial institution know that you'll give it the number as soon as it is available.
Put all money received for each Estate into that Estate’s checking account and make all payments for that Estate from it. The savings account should receive money only from the checking account, and money from the savings account should be transferred only to the checking account. This procedure will ease accounting later on, since all transactions will be reflected in the check register and bank statement.
11. YOUR ACCOUNTING:
Another one of your most important and time-consuming duties is to account for every transaction you make for each Estate, without exception. When you are ready to close each Estate, you will have to type up all of these transactions chronologically and present them to the Court and contingent beneficiaries for approval.
To help you in keeping your accounting records, transact all financial business of each Estate through the checking account. This provides a centralized bookkeeping source. Obtain receipts for all payments made and keep all bills paid. Place receipts and bills in a file in order of payment. If you cannot get a receipt, be sure you have the bill and the cancelled check. And, of course, keep all your bank statements.
At the end of this description you will find two pages, one marked "Schedule A - Receipts", the other "Schedule B - Disbursements". THESE WILL BE E-MAILED TO YOU TO ALLOW YOU TO KEEP A DIGITAL RECORD AND FILL THEM IN AS YOU GO ALONG. These sheets should be copies and used as a second register (besides your checkbook) to help prepare accounts later.
Just prior to closing each Estate, you will need to compile the Receipts and Disbursements made up to that time (called "Final Accounts") and give them to us and we will prepare the Petition to close each Estate and handle other procedural matters. After the Final Accounts are approved, you must pay all remaining bills and give the rest of the property in each Estate to the beneficiaries entitled thereto. Then you will prepare a "Supplemental Accounting" and send that to your attorney for filing with the Court. If the Court approves the Supplemental Accounts and your Application for Certificate of Discharge, a Certificate of Discharge will be issued and your job will be done.
12. YOUR DISTRIBUTIONS:
Besides paying bills, there are distributions to be made to beneficiaries. The beneficiaries of each Estate are those persons named in a Will or, if there is no Will, those persons designated by law.
If a spouse and/or dependents survive the Decedent, they may be entitled to money or property immediately. This arises from the exercise of rights to "family allowance", "homestead allowance", or "exempt property". If it appears that the Estate is insolvent or that the family needs cash immediately, check with us about these rights.
If a Will gives specific gifts to specific persons, those gifts can be given to them any time after the creditors' claims period expires. Each recipient must sign a receipt for any special bequests which are distributed. Receipt forms may be obtained from your attorney and must be filed with the Court.
Assuming that you have enough money or other liquid assets in each Estate to pay all its bills, you should make distributions of specific gifts as soon as possible. However, check with your attorney before distributing real property, because in certain situations a Court Order may be required.
Those people entitled to take what's left of each Estate after all else is done (called contingent beneficiaries") don't get all they are entitled to until after the Final Accounts are approved. That can be quite a long time after death, so you may want to make a partial distribution to the contingent beneficiaries when you know you have enough to meet all needs. You should do several things if you want to make partial distributions: (1) consult with your attorney; (2) distribute to all contingent beneficiaries, pro rata (don't favor one beneficiary); and (3) get a receipt from each beneficiary, which is then filed in the Court.
Of course, this office will be assisting you throughout this probate administration. Please feel free to contact me at any time with questions, concerns, etc.
Duties of a Personal Representative or Successor Trustee
Probate & Trust Administration Retainer Agreement
Probate & Trust Intake Form
Duties of a Personal Representative or Successor Trustee.
Summary duties of a Personal Representative or Successor Trustee in Hawaii. Please see below.
1. YOUR TITLE:
After being appointed by the Probate Court, your title will be "___________________, Personal Representative of the Estate of ____________________________, Deceased.”
This is the name you should use on all documents for each Estate. If it is too cumbersome, you can abbreviate your signature as "___________________, Personal Representative", and you can abbreviate bank accounts and other items to: "The __________________________Estate”
2. YOUR EVIDENCE:
When you are appointed, you will be issued Letters of Administration (if there is no Will admitted to probate) or Letters testamentary (if there is a Will admitted to probate). We will give you a few certified copies (i.e., copies with a Court seal) of this document for your own use. It is the evidence that you have the power to act as Personal Representative, and you will be giving these copies to those with whom you conduct Estate business for the Estate. If you need more Letters or updated Letters, let us know and we will request more copies from the Court for you.
3. YOUR ADVISERS:
As Personal Representative, you have the authority to hire advisers for the Estate. Your attorneys are the most obvious ones. In addition, you can retain stock brokers, investment counselors, tax professionals, and other advisers. The cost of hiring these people is charged against the Estate's assets.
You should pick your advisers carefully. Be sure they are qualified in their fields, that they work quickly, that they account to you regularly for their actions, and that they discuss their fees with you in advance. Your advisers can be of great help to you in administering the Estate. However, you are ultimately responsible if anything goes wrong.
We have attached a checklist of some of the things that you will need to complete as personal representative for the Estate.
4. YOUR COMPENSATION:
As a Personal Representative, you are entitled to be paid for your services to the Estate. You are entitled to “reasonable fees” for your work, which normally is comprised of two components: a fee on income, if any, and a fee on principal. If you are a beneficiary of the Estate, it may not be to your tax advantage to pay yourself a fee, which would be taxable income to you. If you intend to take a fee, please ask us for guidance as to the calculation of the amount(s) that may be charged. The principal fee is usually paid at the end of the probate proceeding or in increments during the administration. The income fee is taken as it is earned, usually quarterly. In addition to the “normal” fees, you and this firm are entitled to extraordinary fees for work beyond that normally required on a Probate. For instance, if you prepare the Tax Returns or spend a lot of time helping in their preparation, you are entitled to a reasonable fee for your time. If you sell, lease or manage real property or defend a suit against the Estate, you may also be entitled to extraordinary fees, but the Judge will usually require the approval of affected beneficiaries. You will have to file an Affidavit to support your claim, so keep good records.
5. YOUR TAXES:
As Personal Representative, you are responsible for the following tax returns:
A. The Decedent's final Income Tax Return.
B. The Estate's Income Tax Returns.
C. The Death/Estate Tax Returns.
D. General Excise Tax Returns.
You must prepare and file a Decedent's Income Tax Return for the years in which The Decedent died. You must also file a Tax Return for the year before death, if The Decedent did not do so. To notify the IRS that you are the Personal Representative of the Estate, you should file IRS Form 56 (available from the IRS). When the Estate is ready to close, you must again file a Form 56 to let the IRS know that you are no longer serving as Personal Representative.
The Estate is its own tax entity. An Employer Identification Number (like a social security number) is required. This office will obtain an EIN for the Estate.
You must annually file a Form 1041, Fiduciary Income Tax Return, for each Estate. Annually does not necessarily mean on a calendar-year basis. You have some choice in setting your own year for tax purposes. Check with your accountant or attorney for help.
There are two primary Estate Tax Returns for you to be concerned about: A Federal Estate Tax Return (Form 706) and a Hawaii Estate Tax Report (Form M-6). These are due nine (9) months from the date of death. You may or may not have to file Estate Tax Returns, depending upon the size of the Estate. Estate taxes are assessed on all property in which the Decedent had an interest, including solely-owned property, jointly-owned property, life insurance, retirement plan proceeds, cars, clothing, jewelry, art, china and furniture. You must establish values and defend them before the IRS, so appraisals are strongly recommended. It is less expensive and time-consuming to obtain an appraisal early than it is to defend your guesstimate value later.
If the Estate has business assets, such as rental property, a General Excise Tax should be assessed and collected and a Return filed with the State. Check with your local Tax Office for forms and licenses. The preparation and filing of all these Tax Returns that you are responsible for is not an easy task or one to be taken lightly. You should probably have a competent accountant or tax professional to help you with the various Returns. YOU ARE PERSONALLY LIABLE if the Returns are not filed or are incorrect. The IRS has an arsenal of penalties and powers to make life uncomfortable for you if something goes wrong. So be careful!!
6. YOUR INVENTORY:
One of the first duties you have as a Personal Representative is to locate, identify, secure, and value all of the Probate assets. "Probate Assets" are those assets of which the Decedent was the sole owner or a tenant-in-common. Life insurance policies or retirement plan proceeds which do not have a named beneficiary may also become Probate assets. Joint bank accounts, joint tenancy property, tenant by the entirety property, life insurance with a named beneficiary, and many other assets are non-Probate property, but you must still identify all of it to properly prepare the Estate Tax Returns and determine liability for claims.
The Inventory should be prepared and filed with the Court as soon as possible after your appointment; the Order will specify that it be filed within thirty (30) days. Each asset of the Estate must be properly and fully described, with any encumbrances (mortgages, liens, etc.) noted, and a value assigned. It is best that you have a professional appraiser prepare written inventories of real and personal property. A stock broker can give you valuations for stocks and bonds. All values reported should be as of the date of death.
When you have prepared the Inventory, give it and all evidence of the valuations to us and we will prepare it in proper form for the Court.
If you are unable to obtain enough information to value an asset, please notify us immediately. If you have reason to believe an asset is not worth anything, note that. You can always amend or supplement the Inventory later if the valuations change or new assets are discovered.
Remember: The Inventory lists only Probate assets (assets owned in the sole name of the decedent, such as a house or bank account in their sole name), not non-Probate assets (such as a house or bank account jointly owned in the name of the decedent and a living joint owner, or a life insurance payable to a currently living person, etc.)
7. YOUR POWERS:
As Personal Representative, you have control over the Decedent's property just as an individual would have over her or his own property. Your Court-Appointed Letters are proof of your power. But there are a few restrictions.
8. YOU ARE A FIDUCIARY:
This is a special relationship under the law. You owe a duty to the creditors and beneficiaries of the Estate and to the government to exercise care in what you do. Although you can undertake most actions without prior approval, you must discuss with this office regarding the sale of any property, particularly real property. It is a good idea to check with the beneficiaries of the Estate prior to undertaking any major change in assets.
Act prudently. Deal with the assets as most business people would deal with their own - conservatively. If in doubt, check with your attorney and beneficiaries.
9. YOUR LIABILITIES:
When the Petition seeking your appointment is filed, we will publish a notice in a newspaper to creditors and anyone else who might have an interest in the Estate. Creditors have four months from the date the notice first appears in the newspaper to present you with claims. During this "creditors' claim period", you should review any bills that come in, determine if they are legitimate, and PAY THEM ONLY IF THE ESTATE IS DEFINITELY SOLVENT. IF THE ESTATE IS NOT SOLVENT, THEN DO NOT PAY ANY CREDITORS AS THAT WILL POTENTIALLY MAKE YOU LIABLE TO ALL CREDITORS - EVEN IF THE CLAIMS EXCEED THE TOTAL VALUE OF THE ESTATE. Please forward all bills to this office for our review. If you question a bill, check with us, because you must follow special procedures. If you have knowledge of any creditors of the Decedent, you must contact them and inform them that they must present their claim to you.
THIS OFFICE WILL DRAFT THE NOTICE TO CREDITORS LETTERS.
Once the creditors' claims period expires, any bills which arose prior to the Decedents’ (your parents) death that were not presented during this period are barred and need not be paid. If you feel that a bill should be paid, even though a claim is not submitted or if submitted late, consult with your attorney and the beneficiaries to get approval. If a secured interest claim is filed during the creditors' claims period, you may be liable if you don't take every action possible to safeguard the secured property and make sure payments are made on time.
Personal liability is the key concern. This means that you would have to pay out of your own pocket instead of paying from the Estate's assets. This will only arise if you waste assets or distribute or otherwise dispose of assets before claims are satisfied. So no distribution should be made to beneficiaries prior to the close of the creditors' claims period without being absolutely certain you have enough assets to pay claims.
Taxes are another matter. You are personally liable for each Estate's Income and Estate Taxes for a period of three years after filing in the event an audit results in changes. Your attorney can tell you how to shorten that period to 9 or 18 months in some instances. Since you may have to pay for any errors, you must be careful.
Finally, if you waste or mismanage assets, the beneficiaries could petition the Court to "surcharge" or penalize you. Again, it would come out of your pocket. So get beneficiary approval for questionable actions.
10. YOUR BANK ACCOUNTS:
You should open bank accounts in the name of the Estate. The names on the accounts should be "__________________, Personal Representative of the Estate of ______________________________________________________, Deceased.” Normally, you must open a checking account (so you can pay bills) for each Estate and you can open a savings account for each Estate if you feel that there will be more cash available then needed for bills. The financial institutions will need the Estate's Employer I.D. Number (see Paragraph 5 above) to allow you to open the account and to report interest earned to the IRS. If you don't have one, let the financial institution know that you'll give it the number as soon as it is available.
Put all money received for each Estate into that Estate’s checking account and make all payments for that Estate from it. The savings account should receive money only from the checking account, and money from the savings account should be transferred only to the checking account. This procedure will ease accounting later on, since all transactions will be reflected in the check register and bank statement.
11. YOUR ACCOUNTING:
Another one of your most important and time-consuming duties is to account for every transaction you make for each Estate, without exception. When you are ready to close each Estate, you will have to type up all of these transactions chronologically and present them to the Court and contingent beneficiaries for approval.
To help you in keeping your accounting records, transact all financial business of each Estate through the checking account. This provides a centralized bookkeeping source. Obtain receipts for all payments made and keep all bills paid. Place receipts and bills in a file in order of payment. If you cannot get a receipt, be sure you have the bill and the cancelled check. And, of course, keep all your bank statements.
At the end of this description you will find two pages, one marked "Schedule A - Receipts", the other "Schedule B - Disbursements". THESE WILL BE E-MAILED TO YOU TO ALLOW YOU TO KEEP A DIGITAL RECORD AND FILL THEM IN AS YOU GO ALONG. These sheets should be copies and used as a second register (besides your checkbook) to help prepare accounts later.
Just prior to closing each Estate, you will need to compile the Receipts and Disbursements made up to that time (called "Final Accounts") and give them to us and we will prepare the Petition to close each Estate and handle other procedural matters. After the Final Accounts are approved, you must pay all remaining bills and give the rest of the property in each Estate to the beneficiaries entitled thereto. Then you will prepare a "Supplemental Accounting" and send that to your attorney for filing with the Court. If the Court approves the Supplemental Accounts and your Application for Certificate of Discharge, a Certificate of Discharge will be issued and your job will be done.
12. YOUR DISTRIBUTIONS:
Besides paying bills, there are distributions to be made to beneficiaries. The beneficiaries of each Estate are those persons named in a Will or, if there is no Will, those persons designated by law.
If a spouse and/or dependents survive the Decedent, they may be entitled to money or property immediately. This arises from the exercise of rights to "family allowance", "homestead allowance", or "exempt property". If it appears that the Estate is insolvent or that the family needs cash immediately, check with us about these rights.
If a Will gives specific gifts to specific persons, those gifts can be given to them any time after the creditors' claims period expires. Each recipient must sign a receipt for any special bequests which are distributed. Receipt forms may be obtained from your attorney and must be filed with the Court.
Assuming that you have enough money or other liquid assets in each Estate to pay all its bills, you should make distributions of specific gifts as soon as possible. However, check with your attorney before distributing real property, because in certain situations a Court Order may be required.
Those people entitled to take what's left of each Estate after all else is done (called contingent beneficiaries") don't get all they are entitled to until after the Final Accounts are approved. That can be quite a long time after death, so you may want to make a partial distribution to the contingent beneficiaries when you know you have enough to meet all needs. You should do several things if you want to make partial distributions: (1) consult with your attorney; (2) distribute to all contingent beneficiaries, pro rata (don't favor one beneficiary); and (3) get a receipt from each beneficiary, which is then filed in the Court.
Of course, this office will be assisting you throughout this probate administration. Please feel free to contact me at any time with questions, concerns, etc.
Duties of a Personal Representative or Successor Trustee
Probate & Trust Administration Retainer Agreement
Probate & Trust Intake Form