What are the Duties of a Fiduciary for an Estate

What is a Fiduciary Losing a loved one is never easy and trying to manage their property and finances only adds extra stress. The purpose of this simple overview is to give a bird' s-eye view of what that process is like. Whether you are trying to figure out the next steps after losing someone or are considering who shall handle your affairs, this article will give you an idea of the process. There are many technical terms used by the probate Court. Here are a few of the most commonly used:

• Decedent: the person who has passed on and left property behind.

• Probate: the process of passing probate property to the heirs and paying creditors.

• Probate Property: any belongings the Decedent owned in their name only at the time of their death that did not have a beneficiary.

• Estate: The legal entity that holds the decedent’s property until it can be distributed.

• Testate: Describing an Estate where a decedent left a Will.

• Intestate: Describing an Estate where a decedent left no Will.

• Fiduciary: the person responsible for managing the Estate. Other terms for Fiduciary include Personal Representative, Executor, or Administrator.

  To expand on the alternative names for a Fiduciary, a Personal Representative is a catch-all term and can be used interchangeably with a Fiduciary. On the other hand, Executors and Administrators are both types of Fiduciaries appointed by a Probate Court. The difference between the two is simple. An executor is chosen by a decedent through a Will, while Administrators are appointed when there is no Will. Despite this simple distinction, the requirements and duties of Executors and Administrators can vary quite a bit. One should also keep in mind that many similar positions in an Estate plan have different powers than a Fiduciary for an Estate. For example, a power of attorney, a guardian, or a trustee are all positions that allow someone to manage property on behalf of another. However, only the Fiduciary for the Estate can manage the property that passes through probate.    

What are the duties of a Fiduciary?

Being a Fiduciary means to act in the best interests of someone else. The central duty of a Fiduciary of an Estate is to act in the best interests of the heirs and the Estate while complying with the law. All of the Fiduciary's other duties are derived from this central duty. Generally, the duties of a Fiduciary can be broken down into three categories. Duty to gather and protect assets, duty to disburse assets, and a duty to comply with Court oversight.

Gathering and Protecting Assets

The first duty of a Fiduciary is to gather the decedent’s probate property. This includes securing bank accounts, securing real estate, and collecting personal belongings, among other similar concepts. All gathered property is cataloged and assigned a value in a list called the Inventory, which is submitted to the Probate Court. Once the property is gathered, the Fiduciary has a duty to protect this property until it can be disbursed per the court’s instructions. This can include ensuring the water is turned off so pipes don’t burst in the winter,  turning off an auto-pay for a service the Decedent can no longer use, or ensuring the Decedent’s real estate is not foreclosed upon. The Fiduciary must not only prevent harm to the property but also ensure there is no waste. For example, if the decedent owned a business that was not being sold, the Fiduciary would be expected to operate that business or hire a competent manager until the business is passed to the heirs.  The Courts generally allow a Fiduciary to use Estate funds to protect an Estate asset from waste or harm. If a Fiduciary must expend their personal assets to protect the Estate assets the Court may allow the Fiduciary to recover that money when the Estate is closed.  

Disbursing Assets

The second category of duties is to distribute the assets of the Estate to the heirs. However, to do that, the Fiduciary must identify who the heirs are. This varies based on whether the Decedent left a Last Will and Testament. If the Decedent was Testate, the heirs are already identified in the Will. However, the Fiduciary will still want to know the Intestate heirs. Probate Courts in Ohio require an executor to inform the Intestate heirs about the probate. This is because the Intestate heirs have a legal right to challenge the legitimacy of a Will. Even if the Will is rock solid, Intestate heirs are still afforded their day in Court. If the Decedent was Intestate, determining the heirs can be trickier. Intestate heirs are determined based on a law called the Statute of Descent and Distribution. Generally, the order of priority goes spouse, child, parents, siblings, and closest next of kin. The decedent’s heirs will be the person or people with the highest priority. Be aware that this is only a generalization, and many factors, such as having children outside of marriage or adoptions, can affect priority. A Fiduciary may not always have the contact information for every heir. The critical information is the heir’s full legal name, date of birth, and mailing address. If the Fiduciary lacks any of this information, they have a duty to use their best efforts to discover whatever information they are missing. In addition to finding the heirs, Fiduciaries must pay any debts the Decedent owned. Unlike heirs, the Fiduciary does not have a duty to seek creditors. In fact, Creditors must seek out the Fiduciary. Under Ohio Law, Creditors have limited time to present a debt to the Fiduciary. The Fiduciary then has the duty to evaluate and either pay or reject that claim. If the creditor fails to present a claim or contest a rejection within a specific time, the debt is void. Be aware that there are exceptions to this rule. For example, if a bank has a mortgage on the decedent’s home, they do not need to present a claim before foreclosing on the property. Once any debts or Estate expenses are paid, the remaining property is given to the heirs. If there is a Will that gives specific property to specific people, that property is distributed first. Then, whatever property remains is split among the heirs. Some Fiduciaries will liquidate assets of the Estate to make dividing assets easier. It is generally recommended that the Fiduciary obtain pre-approval of any sale from the Court before liquidating an asset.  

Complying with Court Oversight

The Administration of an Estate is a process overseen by the Probate Court. This means that a Fiduciary must comply with rules set forth by the Court and report back on the progress of the Estate. The Fiduciary is responsible for submitting three major documents to the Court over the course of the Estate. These are an initial application for appointment, an Inventory, and an Account. In addition to this, additional forms may need to be submitted based on the circumstances of the case and the County in which the probate is taking place. Every Estate has unique circumstances that cannot be comprehensively addressed in a general overview. For a more thorough understanding of what your County or situation requires, it is recommended to consult with a probate attorney. It is important to remember that a Court requires a Fiduciary to present a value for all Property in the Estate. Finding the total value of all assets is important to determine whether the Estate qualified for expedited probate processes, among many other reasons. If the value of an Estate asset is not readily ascertainable, the Fiduciary has a duty to obtain an appraiser to evaluate the property. In addition to the above, a Fiduciary must inform the heirs of the Estate whenever paperwork is filed with the Court. However, the heirs can also sign waivers of notice that excuse the Fiduciary from this duty.  

Costs and Benefits of Serving as a Fiduciary

Beyond the duties imposed by the Court, there are other factors one must consider before appointing a Fiduciary or accepting a Fiduciary position for an Estate. For example, probate is a very time-consuming process. Even a simple probate can take months to administer fully, and particularly complex cases can take years. Additionally, unless a bond is waived, the Fiduciary must personally pay for a bond to insure the assets of the Estate. On the other hand, there are some benefits to serving as a Fiduciary. A Fiduciary may apply for Fiduciary fees if they wish. This is monetary compensation for managing the Estate. If the Fiduciary is also an heir of the Estate, they can still apply for Fiduciary fees in addition to any inheritance they would receive. Additionally, it is possible to obtain reimbursement for personal funds expended in the course of Probating an Estate. For more information on serving as a Fiduciary or choosing who to appoint to serve as a Fiduciary in your own Estate Planning, consider scheduling a free consultation with EQUES® Law Group today. Zac Colopy Junior Attorney EQUES® Law Group