When a deceased individual leaves a will behind, his or her estate goes through the probate process. A surrogate's court or probate court reviews and approves the will, and then disposes of the estate following the directions contained in the will. When a will is not present, an administrator must be selected to oversee and manage the final financial obligations of the deceased, making sure all assets and liabilities are properly disposed of or paid.
Administrator and the Estate
An estate is a legal entity set up to hold the assets, rights, or obligations of a deceased individual. Each estate has one or more people appointed to act on its behalf. An administrator is an individual appointed to dispose of the assets of the estate, manage any creditors, and pay fees out of the estate for any required attorneys, appraisers, or accountants.
Read More: What Constitutes Estate Assets?
Who Can be an Estate Administrator
Statutes exist that dictate who qualifies to act as an administrator. An administrator for an estate is appointed based on a list of family members, in a particular order. The first choice is the spouse of the decedent, then the children of the decedent if no spouse exists. Next in line is the decedent's mother or father, then siblings if there are no surviving parents, and grandparents if no other family exists.
The administrator receives a commission from the estate as compensation. The amount is derived using a sliding scale based on the estate's size, applied to a percentage of the total estate.
If more than one family member qualifies, they must decide among themselves who should be appointed. If no decision is made, the court chooses. The chosen administrator must usually pay a certain amount of money in the form of a bond as one of the conditions of accepting the appointment.
Estate Administrator Duties
Estate administrators have several duties to perform. They must find and gather all of an estate's assets and debts, request an IRS identification number, and open an account for the estate. They must also oversee all of the assets of the estate, pay off any debt obligations owed by the decedent, reimburse a reasonable amount of expenses related to the funeral, pay any taxes due on the estate, and then, finally, distribute any remainder of the assets to surviving family.
An administrator will take title legally on the estate's assets, and has a legal responsibility to file all tax returns and pay all of the related taxes. This includes state and federal estate tax and income returns, payment of estate death taxes and inheritance taxes, and the deceased's final federal and state income tax returns. All the tax bills typically must be satisfied before any other outstanding debts. In certain cases, the administrator may have personal liability for any unpaid tax amounts due for the estate.
Read More: How Does Estate Tax Work?
Estate Planning and Making a Will
If you want to avoid having an estate administrator appointed to handle your property and financial matters after your death, then it is important for you to take the time to make a will. This is part of an overall estate planning process that includes looking at things like life insurance, a power of attorney, a living will, and other matters.
Otherwise, your personal property may not be divided the way you wish. Instead, your estate will be handled based on the law according to the state where you live. Your will also allows you to appoint someone you choose to handle your estate after death.
For more information on your rights and responsibilities when making a will and on what would happen if your estate was to be handled by an administrator, contact an experienced attorney near you.
Read More: How to Collect Debt from an Estate
Cynthia Gaffney has spent over 20 years in finance with experience in valuation, corporate financial planning, mergers & acquisitions consulting and small business ownership. She has worked as a financial writer for online finance publications since 2011, including eHow Money, The Motley Fool, and Sapling.com. She has also edited for several online finance publications, including The Balance, Opposing Views:Money, Synonym:Money, and Zacks.com. A Southern California native, Cynthia received her Bachelor of Science degree in finance and business economics from USC.