The major financial risks that come with estate administration

On Behalf of | Sep 12, 2023 | Estate Planning

If someone asks a member of their family or inner circle to serve as their executor, they probably trust that individual. Similarly, if the probate courts appoint someone to serve as the administrator of an estate, that is likely a sign that the individual in question has a history of competence and ethical behavior that indicates that they can manage the challenges of estate administration effectively.

Executors and administrators are each a type of personal representative. Personal representatives have a legal responsibility to abide by Pennsylvania probate law, as well as a fiduciary duty to act in the best interests of the people named as the beneficiaries of an estate. They typically receive a small amount of compensation for their work, but their services also come with a significant risk of personal liability. For example, the personal representative of an estate could be at risk of major financial challenges if they fail to take the right steps during estate administration

Mismanagement of resources can lead to consequences

Occasionally, if the beneficiaries of an estate believe that the personal representative of the estate either embezzled or managed assets so incompetently that it generated a sizable loss, they can take legal action against the representative and hold them financially accountable for those failings. The courts could order someone to replace any resources misappropriated from the estate.

Financial obligations can pass to the representative

The more likely source of financial responsibility will be the economic obligations of the estate itself. The debts that the decedent owed before their passing will become the responsibility of the state. There will likely also be taxes that the estate needs to cover.

If the estate does not have sufficient resources to fulfill those obligations, the personal representative does not automatically become responsible for the balance owed. However, if there were enough resources and someone simply didn’t use them properly, then they could have personal financial responsibility for the value of those assets.

Creditors and tax authorities could take legal action against the personal representative of an estate if they did not properly utilize the assets in an estate to pay financial responsibilities in the right order of priority. While they may not be responsible for the full balance of those debts, they could be responsible for the value of any assets that they distributed to beneficiaries instead of using them to repay creditors.

Learning more about what Pennsylvania requires from executors and administrators can help people avoid potentially expensive mistakes. Seeking legal guidance, which is an effort usually paid for by an estate, can help those serving in these roles to receive necessary support as well.


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