10 Common Mistakes Personal Representatives make in the Probate Process

Locating All Assets

The Importance of Identifying All Decedent’s Assets in the Colorado Probate Process

As the personal representative of an estate, one of the key responsibilities is to prepare an accurate inventory of the decedent’s assets. The inventory is a crucial part of the probate process, as it helps to ensure that all of the assets are accounted for and properly distributed to the heirs and beneficiaries. Unfortunately, many personal representatives make the mistake of not identifying all of the assets, which can result in significant consequences. Below are some of the reasons why failing to identify all of the assets is a mistake in the Colorado probate process:

• Mismanagement of Assets: Personal representatives are responsible for managing the assets of the estate until they are distributed to the beneficiaries. Managing the decedent’s assets is based on the understanding of being able to locate all assets. When a personal representative fails to identify all of the decedent’s assets, they may unknowingly overlook valuable items or property that can lead to the estate being undervalued and the beneficiaries receiving less than they are entitled to. This can lead to legal actions against the personal representative.
• Tax Consequences: Not identifying all assets can result in tax consequences for the estate. All estate assets must be properly accounted for and reported for tax purposes. For example, if an asset is not reported to the Internal Revenue Service, it could result in an underpayment of taxes, leading to penalties and interest charges. An example is an income (dividend) producing stock of the decedent’s that was not identified by the personal representative. Stock dividends are considered taxable income and must be reported on the estate’s tax return. If the income is not reported to the IRS, it could result in penalties that will be imposed against the estate.

Communicating with Beneficiaries

Why Failure to Identify and Communicate with Beneficiaries is a Mistake for Personal Representatives

As a personal representative, one of your key responsibilities is to identify and communicate with the beneficiaries of an estate. Unfortunately, many personal representatives make the mistake of failing to properly advise and communicate with the heirs and beneficiaries, which can result in serious issues during the probate process. Below are a few reasons why failure to identify and communicate with beneficiaries are a mistake:

• Creates confusion and misunderstandings: If the personal representative fails to advise and communicate with the heirs and beneficiaries, it can result in confusion and misunderstandings. For example, the heirs and beneficiaries may not understand their rights and responsibilities during the probate process, or they may not know when they can expect to receive their inheritance. An heir or beneficiary may challenge the distribution of assets if they believe that they were not adequately informed of their rights and responsibilities during the probate process.
• Missed Opportunities: Personal representatives who fail to identify and communicate with beneficiaries may miss out on important information, such as a beneficiary having valuable information such as the location of important documents or assets that could help during the probate process. In addition, beneficiaries may be able to add context and value to specific assets or debts, providing the personal representative more information to make important fiduciary decisions.

Not Securing Assets

Understanding the Importance of Securing Assets as a Personal Representative

As the personal representative of an estate, it is your responsibility to take control of and secure the assets of the decedent. This is an important step in the probate process as it helps to ensure that the assets are protected and preserved until they can be distributed to the heirs and beneficiaries. Unfortunately, many personal representatives make the mistake of failing to take control and secure the assets, which can result in serious issues during the probate process. Below are a few reasons why failure to properly secure the assets of the decedent is a mistake:

• Increases the risk of theft or loss of assets: If the personal representative fails to take control and secure the assets of the estate, the risk of theft or loss of assets increases. For example, if the deceased person’s home is left unsecured, it could be vulnerable to theft or vandalism. This could result in significant financial losses for the estate and its heirs and beneficiaries, while opening the personal representative to legal challenges.

• Decreases the value of the estate: If the personal representative fails to take control and secure the assets, the value of the estate may decrease. For example, let’s say a person named John passed away in Colorado in January 2022. John’s Will named his daughter, Sarah, as the personal representative of the estate. However, Sarah did not open probate until November 2022, almost 11 months after John’s death. During this time, John’s assets were not properly managed and his real estate properties were left vacant and without maintenance, causing the properties to fall into disrepair, resulting in a significant decrease in the value of John’s estate. If Sarah had opened probate in a timely manner, it is likely the value of John’s estate would have been preserved. However, by delaying the opening of probate, Sarah failed to fulfill her duty as a personal representative and caused a decrease in the value of the estate.

Distributing Estate Assets Prematurely

Why Distributing Assets of Estate Prematurely in the Colorado Probate Process is an Issue for Personal Representatives

As the personal representative of an estate, it is your responsibility to distribute the assets of the estate in accordance with the will or the laws of intestacy. Many personal representatives make the mistake of distributing the assets of the estate prematurely. Below are a few reasons why prematurely distributing assets of the decedent is a mistake:

• Increases the risk of legal action: Distributing assets of the estate prematurely can increase the risk of legal action against the personal representative. For example, if a creditor comes forward after the estate assets have been distributed, the personal representative may be held responsible for assets that should have been used to pay the creditor. Additionally, if an heir or beneficiary challenges the distribution of assets, the personal representative may be held liable for any damages or losses that result from the premature distribution.

• Creates confusion among the heirs and beneficiaries: Distributing assets of the estate prematurely can also create confusion among the heirs and beneficiaries. For example, if an heir or beneficiary receives a portion of the assets before the estate has been fully settled, they may assume the probate process is complete and no longer participate in the process. This could result in an incorrect distribution of the assets and help create disputes among the heirs and beneficiaries.

Failing to Pay Claims Against Estate

Why Failing to Pay Claims Made Against Estate Assets in the Colorado Probate Process is an Issue for Personal Representatives

As the personal representative of an estate, it is your responsibility to ensure that all claims made against the estate are paid in a timely manner. However, many personal representatives make the mistake of failing to pay claims made against estate assets, which can result in serious issues during the probate process. Below are a few reasons why failing to pay claims made against estate assets is a mistake:

• Deceases the value of the estate: Failing to pay claims made against the estate assets can also decrease the value of the estate. For example, if the personal representative fails to pay a claim that is later determined to be valid, the estate may be required to pay the full amount of the claim, plus any interest, penalties, and legal fees. This could reduce the amount of assets available for distribution to the heirs and beneficiaries.

• Increases the time and cost of the probate process: If the personal representative fails to pay claims made against estate assets, it can also increase the time and cost of the probate process. For example, if a creditor takes legal action against the estate, the probate process could be delayed while the claim is resolved. Additionally, the cost of resolving the claim, including any legal fees and costs, could also increase.

Self-Dealing

Why Personal Representatives Should Avoid Self-Dealing during the Colorado Probate Process

Self-dealing occurs when a personal representative uses their position for their own personal gain. This can include using the decedent’s assets for their own benefit or giving themselves an unfair advantage in the distribution of the assets. Self-dealing is considered a breach of the personal representative’s fiduciary duty to the beneficiaries of the estate and is strictly prohibited under Colorado law. Self-dealing can also cause significant harm to the beneficiaries, as they may receive less of the assets they are entitled to, or they may be left with a complicated and costly legal battle to recover the assets. A common example of self-dealing involves the personal representative stating the decedent told them specific instructions pertaining to the distribution of assets. If the decedent wanted to control their assets after death, they must make a valid written testamentary document. Without such, the state intestacy statutes will determine who receives the property. A personal representative cannot guess at what the decedent wanted to happen with the property. The personal representative has a fiduciary duty to act in the best interests of the estate and its beneficiaries which includes following the legal rules and procedures for distributing the decedent’s estate assets, even if that may not align with what they believe the decedent would have wanted.

Commingling Funds

Why Personal Representatives Should Keep Estate and Personal Finances Separate during the Colorado Probate Process

Commingling occurs when the personal representative mixes estate funds with their own funds in a single bank account or other financial institution. For example, if the personal representative takes money from the estate and uses it to pay their own bills, this would be considered commingling. This can make it difficult for the personal representative to account for the funds in the estate and can raise questions about the integrity of their management of the estate. In addition, commingling funds can make it difficult to determine the exact value of the estate and can create conflicts between the personal representative and the beneficiaries. In order to avoid issues with commingling, personal representatives are typically advised to keep estate funds separate from their own funds. This can be done by setting up a separate bank account for the estate.

In addition, with a personal representative being accountable for every dollar of the estate, commingling funds can lead to unauthorized expenses paid by estate funds. An unauthorized transaction is any transaction made by the personal representative that does not pertain to the direct business of the estate. An example of an unauthorized transaction would be a personal representative paying the travel and lodging expenses for family members to attend the funeral of the decedent. Unauthorized transactions payable from the estate are a breach of fiduciary duty and can have significant legal and financial consequences for the personal representative.

Why Hiring an Experienced Probate Attorney is Essential for Personal Representatives

While you may want to save the estate money, trying to probate the estate without the help of an experienced probate attorney can cost the estate money in the future. A Colorado probate attorney can help personal representatives avoid common mistakes, understand their obligations under the law, and fulfill their duties in accordance with the wishes of the decedent. With the right guidance and support, personal representatives can navigate the probate process with confidence and ensure that the estate is managed and distributed in a manner that is fair and just.

If you are a personal representative of an estate, it’s essential to move forward with the probate process as efficiently as possible. At the Law Office of Josh Krieg, our Fort Collins probate attorneys provide the knowledge, experience and resources you need to navigate the legal challenges presented by the probate process. With a physical location in Fort Collins, Colorado, we are pleased to offer full remote services to clients throughout Colorado, Wyoming and North Dakota. Whether you are seeking assistance with estate planning, probate, or a related matter, our team is here to help. Read our law firm reviews and contact us today to find out about our lawyer services, to schedule a consultation, and experience our professional and personalized approach to the law.