Nearly every estate in South Carolina must have a Personal Representative. While a decedent’s Will may nominate the Personal Representative, the Judge of the Probate Court will ultimately decide who will fulfill this role. Generally, if the nominee is of legal age, is capable, and is willing, then he or she will receive the appointment.
According to South Carolina section 62-3-702, “A Personal Representative has a duty to settle and distribute the estate of the decedent in accordance with the terms of a probated and effective will and this code, and as expeditiously and efficiently as is consistent with the best interests of the estate.”
Being the Personal Representative (also known as an executor or administrator) of a decedent’s estate can be an arduous task. While the other friends and family members are grieving for the one they have lost, the Personal Representative must go straight to work to be sure that the decedent’s affairs are settled in a timely and orderly manner. Administration of an estate will normally take anywhere from 8 months to 2 years to complete so patience is a must for the Personal Representative and the estate beneficiaries.
The following are some of the steps that a Personal Representative may need to complete to close a decedent’s estate. These steps are not necessarily in chronological order rather some may need to be accomplished synchronously. While most of the following steps should be conducted by (or under the advisement of) an attorney, the Personal Representative is responsible for seeing them carried out.
1) Make Funeral Arrangements. Prior to official appointment as Personal Representative by the Court, the Personal Representative may not conduct official actions on behalf of the estate. The only exception to this rule is that the Personal Representative may carry out written instructions of the decedent relating to his or her body, funeral, and burial arrangements. In addition, the person named as Personal Representative in the Will may pay for funeral expenses. If the Personal Representative is not named in the Will, and the instructions for burial are not given either, then the burial decisions are made by the next of kin.
2) Secure Formal Appointment. To be officially named as the Personal Representative, the party must arrange a meeting with the clerk of the Probate Court of the county of the decedent. The party should bring the original of the Will (if there is one), the death certificate, and the contact information of the decedent’s blood relatives or other heirs. Upon appointment, the Court will provide the Personal Representative with letters testamentary (also known as a certificate of appointment) which the Personal Representative may then use as proof of his or her power to represent the estate.
3) Notify Creditors and Beneficiaries. Generally, an attorney will perform this step for the Personal Representative. A notice is normally published in the newspaper to notify the decedent’s creditors that the estate is open and that claims should be submitted to the Personal Representative. In South Carolina, creditors have eight months from the date of publication of the notice to file their claims.
Beneficiaries of the estate should also be notified that the estate is being probated as well.
4) Obtain a Federal Tax Identification Number (FEIN). An FEIN must be obtained in order to properly report income of the estate to the IRS. An estate must have an FEIN before it can open brokerage/bank accounts or file tax returns.
5) Perform a Document Search. The Personal Representative should conduct a thorough search of the decedent’s documents. This includes documents on the decedent’s computer or in his or her email account if possible. This search is important as it may help the Personal Representative discover assets or liabilities of the decedent, trusts established by the decedent, or instructions that apply to administration of the estate. The following is a list of documents that the decedent should search for:
a. Burial instructions or arrangements
b. Safety deposit box contracts
c. Partnership or S-Corporation agreements
d. Life insurance policies or monthly statements
e. Deeds or titles to real estate or other property
f. Bank statements, check books, and check registers
g. Statements or agreements regarding annuities, IRAs, or other retirement accounts
h. Recent income tax returns
i. Gift tax returns
j. Unpaid bills
k. Military records
l. Trust instruments
m. Stock certificates, bond certificates, CDs
n. Brokerage account statements
o. Tax reporting forms such as Forms 1099, 1098, 5498, W-2, or K-1
p. Divorce papers
q. Legal bills
r. Paycheck stubs
s. Loan agreements
6) Inventory and Secure Assets. Probating an estate requires preparation of a list of all assets (and their associated fair market values) that the decedent owned on his or her date of death. This list is called the Inventory and Appraisement and it must be filed within 90 days of the date of death in South Carolina.
Generally, this is hardest part of the probate process. Ideally, the decedent will leave a listing of all the assets he or she owned on the date of death; however, this is often not the case. The following is a list of some assets that may need to be identified:
a. Stocks, bonds, CDs
b. Cash in accounts or safes
c. Real estate
d. Tangible personal property (vehicles, jewelry, antiques, collectibles, or other personal effects)
e. Partnership or S-Corporation interests
f. Insurance policies, annuities, IRAs, retirement accounts
g. Receivables or rights in legal actions
h. Other intangibles such royalties or patents
The document search should assist with the identification of the decedent’s assets.
Obtaining the value of the assets on the date of death is important, as it will be used as the tax basis of assets distributed or sold by the estate. The law authorizes the Personal Representative to hire appraisers when their services are needed. It is recommended that the Personal Representative hire an appraiser whenever the value of an asset is questionable such as with real estate or a business interest that is not publicly traded.
The Personal Representative should secure the property (no matter how small or insignificant) as soon as possible as he or she may be found liable if assets are missing. Securing the assets might involve changing the locks on the decedent’s home, moving valuable assets to a separate location, and changing the online passwords to all bank/brokerage accounts.
If the decedent was the sole owner and manager of a business, the Personal Representative will need to make the decision whether to continue operations of this business, discontinue the business, or to suspend its operations.
Normally, the Personal Representative will move all assets held in bank/brokerage accounts by the decedent to new accounts in the name of the estate. The new account should have check- writing capability as to allow the Personal Representative to pay the bills of the estate.
7) Payment of Debt and Bills. A large mistake that a Personal Representative can make is to rush to pay off a decedent’s debts. In addition, some bills may be needed to be paid to maintain estate assets until they can be sold or distributed. Furthermore, the Will may have specific language as to how the estate assets should be liquidated to cover these claims. Generally, it is best to speak with an attorney about the timing and priority of making these payments.
8 ) Filing and Paying Taxes. It is usually necessary for the Personal Representative to file the decedent’s final individual income tax return (Form 1040). Also, if the decedent has a gross estate of more than $5,250,000, an estate tax return (Form 706) may need to be filed. If the decedent’s estate earns income before is closed, it will need to file an estate income tax return (Form 1041) as well. Generally, a tax professional or an attorney should be hired to prepare and file these forms. The Personal Representative will need to make sure that all taxes have been paid before closing an estate as the Personal Representative can be held personally liable if the funds necessary to pay taxes were already distributed.
9) Making Distributions. The Personal Representative should not make any distributions to beneficiaries without the approval of the Court. Distributions will be made in accordance with the terms of the Will or according to law if through intestate succession. Generally, distributions will not be made until the end of the process. Once all distributions are made, the Personal Representative will request the Court to terminate his or her fiduciary responsibilities.
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