Serving as personal representative for a Florida estate is a big responsibility. Those who have been appointed personal representative are often concerned about the level of obligation involved. That includes many elements. Some personal representatives are worried about the amount of time required to carry out their duties. Others aren’t sure they have the skills and knowledge necessary to tackle the role. Another significant area of concern for many personal representatives is potential liability associated with their role.
Whether or not a personal representative is individually responsible for any costs of administration, debts of the estate or other obligations depends on the specific circumstances. So does liability to the estate, or to beneficiaries of the estate. But, the news is generally good. That is, a Florida personal representative is generally not individually liable, either to creditors of the estate or to beneficiaries.
This post provides a general overview of personal representative liability. Your probate attorney can provide more specific information, both during your initial consultation and if any concerns arise during administration of the estate.
Personal Representative Liability for Debts of the Estate
Debts of the Deceased
Debts of the deceased generally become debts of the estate. In other words, if the deceased had an outstanding credit card balance of $10,000, then the obligation to pay that balance passes to the estate. The personal representative is responsible for managing these debts, from identifying creditors to publishing required notices and making payments, in his or her official capacity. However, that doesn’t make the personal representative individually liable.
If there are sufficient assets in the estate, the personal representative is responsible for paying debts before taking certain other actions, like distributing assets to beneficiaries. If there are some assets but not enough to go around, Florida law makes it easy for the personal representative by listing categories of debt in order of priority. If the assets run out and some creditors remain unpaid, they don’t get paid. The debts do not become the responsibility of the personal representative as long as he or she has followed the law in distributing the assets that were available.
The competing demands of creditors, expenses of administration and beneficiaries can be stressful. But, the probate attorney representing the personal representative can help with this aspect of the administration, ensuring that the personal representative is attending to the highest priority debts first and apportioning funds appropriately. Having clear information about the legal hierarchy can help the personal representative respond to questions from beneficiaries or demands from creditors who aren’t top priority.
It’s also worth noting here that in most circumstances, the family members of the deceased are also not liable for payment of the deceased’s debts. This isn’t specifically an issue for the personal representative, but is often a concern expressed by beneficiaries. Some unscrupulous creditors will attempt to collect from surviving family members, even though they know the family is not responsible for the debt.
The personal representative isn’t typically responsible for tax debts of the estate. However, taxes owed to the state are treated differently than other debts of the estate in one way: if the personal representative distributes assets of the estate without paying or otherwise resolving taxes owed to the state of Florida, he or she becomes personally liable for those unpaid taxes.
This provision doesn’t make the personal representative responsible for taxes in excess of the property of the estate, though. He or she is liable only to the extent of estate property that came into the personal representative’s custody or control. The goal is to ensure that the state receives the payment it would have received if the estate distribution had been handled properly.
Similarly, the personal representative may be liable for federal tax obligations of the estate if the personal representative doesn’t properly prioritize those claims.
Debts Incurred on Behalf of the Estate
In the administration of the estate, the personal representative may find it necessary to incur debts. For example, the personal representative may:
- Hire an appraiser to assess the value of estate property
- Rent a storage facility for safekeeping of estate property until the estate settles
- Hire someone to maintain real property or other estate assets during the pendency of the estate
- Hire a CPA to prepare estate taxes
These are just a few of the possible services a personal representative may contract for on behalf of the estate.
The personal representative may be asked to sign contracts on behalf of the estate when securing these and other services. However, those contracts should be executed in the name of the estate, not the personal representative. The personal representative signs as an agent of the estate, and not on his or her own behalf. The only exceptions are:
- If the personal representative fails to disclose his or her role and does not identify the estate in the contract; and
- Certain contracts for attorney’s fees
This type of claim can be confusing for those unfamiliar with the process, since a lawsuit filed to collect these fees would be filed against the personal representative in his or her official capacity. But, just as the contract was signed by the personal representative but the estate was the actual party to the contract, it’s the estate that is responsible for any judgment entered in the suit.
Torts Committed in the Course of Administration
A personal representative may be individually liable for torts committed in his or her capacity as personal representative. This is a relatively unusual situation, which would involve intentional wrongdoing or negligent behavior on the part of the personal representative that caused harm to a third party. For example, a personal representative delivering the deceased’s car to a storage facility might be personally liable if she drove negligently and damaged facility property.
Personal Liability for Breach of Fiduciary Duty
The section above provides an overview of the limited circumstances in which a personal representative may be individually liable to outsiders. Potential liability to beneficiaries of the estate is somewhat different, because the personal representative has a fiduciary duty to beneficiaries.
What is Fiduciary Duty?
In simple terms, a fiduciary holds a special place of trust and is obligated to prioritize the interests of another party. In the case of a Florida personal representative, the person has been entrusted by the deceased and the court with administering the estate according to the deceased’s instructions, and in the interest of the beneficiaries.
A personal representative who doesn’t live up to that responsibility may be personally liable for any resulting losses, and for attorney’s fees a beneficiary incurs in pursuing a claim for breach of fiduciary duty.
What is a Breach of Fiduciary Duty?
While a fiduciary is held to a higher standard, he or she isn’t expected to be perfect. A personal representative isn’t necessarily liable for any misstep that results in loss. Some examples of breaches of fiduciary duty that may lead to individual liability include:
- Misappropriation of estate assets and other fraudulent activity
- Self-dealing, which means to engage in transactions on behalf of the estate with the goal of benefitting the personal representative rather than the estate and beneficiaries
- Improper investments resulting in losses to the estate
- Claiming excessive compensation for serving as personal representative
Under these circumstances, the personal representative may be individually responsible to make up the losses. For example, if the estate owns a piece of real property with a current market value of $250,000 but the personal representative decides to purchase the property herself for $180,000, the estate has potentially lost $70,000. If a beneficiary pursues a claim against the personal representative for that loss to the estate, he or she will likely incur attorney’s fees.
The personal representative may be liable for both the loss to the estate and the attorney’s fees associated with pursuing that claim.
Avoiding Individual Liability as a Personal Representative
You’ll note that nearly every scenario in which a personal representative may become individually liable, either for debts of the estate or to the estate and/or beneficiaries, it’s because he or she has done something wrong. That’s why finding the right probate attorney and working closely with your lawyer is so important when you’re serving as personal representative of an estate.
Florida Probate Attorney Thomas Upchurch has extensive experience serving Florida personal representatives. He and his staff will assist every step of the way, from making sure you understand your responsibilities and answering any questions you have to assisting in identifying assets, providing notice to creditors, and managing distributions according to the terms of the will and Florida probate law.
The earlier in the process you get knowledgeable guidance, the smoother and more stress-free the administration can be. If you’ve been named personal representative for the estate of a recently-deceased friend or family member, give yourself the benefit of an experienced probate lawyer right now. Just call (386) 272-7445 or fill out the contact form on this site to schedule your initial consultation with attorney Thomas Upchurch.
Summary: Being appointed as a Personal Representative of a probate matter has positive and negative aspects. On one hand, a Personal Representative may find comfort in settling an estate as the testator wishes and being paid for his or her services at 3% of the estate value up to the first $1,000,000. See § 733.617, Fla. Stat. (2013).
On the other hand, what about the potential personal liability that may occur if a Personal Representative distributed the assets but failed to pay taxes due the state? A Personal Representative who makes a distribution in whole or part of any property prior to paying or securing the tax which is due to the state under chapter 198, or otherwise obtained a release from lien of such tax, the Personal Representative shall become personally liable for such tax. See § 198.23, Fla. Stat. (2013). For this reason and others, it’s important to you as a Personal Representative to have proper legal and probate assistance. Contact Upchurch Law for an experienced attorney working with Personal Representatives in Florida.
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