The sad news of a loved one recently passing away is still weighing on you and your family when the discussion turns from the logistics of the funeral arrangements, to which family member is going to handle the estate matters. If there is no will, oftentimes a "responsible" sibling or family member steps up to the plate to take on the role of Executor or Executrix (A.K.A. "Personal Representative" or "Estate Administrator").

If there is a will, it will specifically name a person or persons who will act as the personal representative (s) of the Estate. In either case, the new personal representative has now inherited quite a bit of responsibility and liability. As a personal representative, your primary responsibility is to handle the estate and preserve and transfer its assets in the most efficient manner possible. You are in fact working on behalf of the estate’s beneficiaries.

When a person dies, a legal process called "Probate" begins. The purpose of probate is to validate an existing will. It is also the procedure by which the personal representative is appointed to handle the affairs of the deceased. If there is no will than the surviving spouse has the first right to apply for the position of personal representative, however, any heir of the decedent may be appointed by the Surrogate Court. If this is the case all other heirs must renounce their right to be appointed as a personal representative. The Surrogate Court in the county of the deceased will provide this form to the would-be personal representative who will complete it for each heir and have them sign and return.

Personal Representative Responsibilities

1. Obtain the original copy of the will. If the will was notarized then it is considered to be “self-proven”. If it was not notarized than at least one witness who signed the will must accompany the personal representative to validate the decedent’s signature.

2. Obtain at least ten certified death certificates. You can request this from the Funeral Home.

3. The personal Representative named in the will should take the will and certified death certificates to the Surrogate Court located in the county of the deceased.

4. Copies of the will should be sent to each beneficiary within 60 days from the date probate begins.

5. All assets of the decedent must be inventoried and accounted for. This is important, as you will receive a Surrogate Certificate from the court that authorizes you, as personal representative, to take certain necessary actions such as transferring stock, closing bank accounts, etc.

6. Every asset is held in some form of legal title. This is important in order to determine how the property will pass to the beneficiary(ies). You should notate next to each individual asset how the asset is titled. For example, assets titled as "jointly held with rights of survivorship" pass automatically to the surviving owner(s), without having to go through the probate process. It’s an automatic transfer of ownership that occurs upon the death of one of the owners.

7. Some assets may need to be sold (i.e. principal residence, stocks etc.). It is therefore important that the personal representative open an estate checking account, which can be used to receive such funds.

8. Next, all debts identified need to be paid off. Again, the estate checking account should be used to disburse such funds.

9. State inheritance taxes must be filed within 8 months after the decedent’s death. Such tax is due on assets distributed to a class of beneficiaries that are not: surviving parents, grandparents, children, stepchildren, adopted children or grandchildren (A.K.A. "Class A Beneficiaries").

10. Federal and Estate tax may be due and returns may be required to be filed. Federal law excludes the taxation of any estate whose taxable value is less than $2 million for 2006. New Jersey taxes any estate valued at more than $675,000 in 2006. You should consult with a CPA or an attorney if the estate may be greater than $675,000.

11. Whatever is left is then distributed in accordance to the will, or in accordance with New Jersey Probate laws, if the loved one died without a will.

Practical Considerations

The various decisions to be made by the personal representative-for example, whether to sell or hold certain securities, what rate of return to seek on investments, and whether to carry on or sell the decedent’s business-can often result in complaints by the beneficiaries. You see, when you become a personal representative, you take on some risk. If the beneficiaries do not feel you are acting in their best interest you can be surcharged, which is a five-dollar word for "found guilty of mismanaging the estate".

When you are surcharged you become personally liable for any mistakes made in the administration of the decedent’s estate. This is why New Jersey requires that personal representatives obtain a surety bond. Bonding is insurance the personal representative buys to cover any potential liability that may result from them making mistakes that the beneficiaries may seek financial restitution for. The personal representative must contact the Surrogate Court located in the county where the decedent had lived to obtain the required application for a surety bond. The Surrogate Court will send out paperwork to be completed by the personal representative and there will be a fee for the surety bond. Having the bonding may sound like the problem is solved, but the real problems are just beginning.

There will be issues that crop up that were unexpected. Did the decedent lend any money to any family members? If so, how much? This debt needs to be paid back to the estate or settled by you, as personal representative, in a manner that all of the beneficiaries agree upon. Do any beneficiaries have possession over any estate property that they contend was gifted to them by the decedent? If so, is there a gift letter they can provide to prove this? If there is no gift letter then the personal representative and the beneficiaries need to work this out. Did any of the beneficiaries lend money to the decedent? If so, can the creditor-beneficiary provide any formal documents, like a note, setting forth the terms of the debt? If not then the personal representative and the beneficiaries will need to work this out as well.

The smart personal representatives seek out professional advice from attorneys and CPAs to not only get the estate settled properly but also to deflect any potential missteps or perceptions of missteps that could result. The professionals can also help expedite the paperwork required by the Surrogate Court, bonding agency and any other third parties that may be involved. At the very least you should spend an hour with each professional to help better understand the probate process in New Jersey and develop a game plan to settle the estate.