The task of serving as the Personal Representative (P.R.) of an estate can include a vast number of responsibilities. Deceased family members may leave behind complicated or messy estates and the law may impose numerous hurdles for the P.R. to navigate. Our office provides the guidance and support to address these concerns. However, many of our clients find the ethical responsibilities of servings as a P.R. unfamiliar – sometimes even difficult. So, what are the ethical considerations someone seeking appointment as a P.R. must be prepared to confront?
The P.R. is the sole person authorized to settle the decedents affairs and to “administer” the estate. The P.R. must collect and safeguard assets, pay costs and claims, conclude legal and tax matters, and distribute assets to the heirs (if there is no Will) or devisees (the individuals or organizations named in a Will). The P.R. is a “fiduciary” entrusted to handle property on behalf of, and in the best interests of, other people who really don’t have much say or power. There are many fiduciary relationships in the law, such as that between trustees and beneficiaries, attorneys and clients, wealth advisors and clients, and corporate officers and shareholders, to name a few. A P.R., like all fiduciaries, is obligated to honor a seemingly simple code of care and loyalty, always acting in the best interests of the estate above his or her own self-interest. Specifically, in Massachusetts, a P.R. must observe the same standard of care as that of a trustee.
At first glance, this seems easy enough. In practice, however, reality and emotions often throw a curve ball at the P.R. Death and money are difficult subjects to negotiate with family. The P.R. is often a close family member of the deceased: typically a spouse or a child, sometimes one of multiple children, the rest of whom were not entrusted to serve in this important role. As a family member, the individual nominated to be P.R. also takes from the estate as a beneficiary, leading to differences of opinion and tension between the P.R. and other family-member beneficiaries. The P.R. must always remember that their legal obligations as a fiduciary can never be influenced by their relationships with other interested parties, or lack thereof. As we remind our clients daily, the P.R. must think of him or herself as “wearing your P.R. hat” and not “your personal or beneficiary hat.” Each party with an interest in the estate has the absolute right to be treated fairly and the Courts will enforce that right if the P.R. lets emotion get in the way.
Treating all interested parties fairly becomes an even tougher pill to swallow when the P.R. learns that he or she owes a fiduciary duty to creditors of the estate too. Now, this by no means precludes the P.R. from contesting or negotiating claims against the estate but, assuming a creditor has filed and proved a legitimate claim, the P.R. must also administer the estate with the goal of maximizing the satisfaction of that claim, even where payment will reduce dollar-for-dollar what the P.R. gets as a beneficiary. Recall, the P.R. must put all interested parties ahead of his or her own self-interest! The P.R., for instance, cannot attempt to sell estate assets at below fair market value with the intent of reducing the assets available to pay creditors or distribute to beneficiaries, or may be held personally liable to them for doing so.
To give a sense of how difficult this can be for the P.R., consider this recent situation: a mother’s Will left a portion of her estate to her long-time boyfriend, and the balance to her adult children, with one of her daughters nominated as P.R. The boyfriend, whom the children never liked, then died a few weeks later without a Will. Unbeknownst to the mother, the boyfriend had been married during their entire relationship and had spoken to or seen his wife almost every day. All of this was discovered by the children after the fact. Because the boyfriend died without a Will, his estate – which now included a share of the mother’s estate – passed to his wife, who promptly sued the P.R. daughter on the grounds that the daughter was not fit to serve. Thus, the P.R. daughter faced distributing a portion of her mother’s estate – including her childhood home – to the wife of her mother’s cheating boyfriend; an individual whose first instinct was to sue the P.R. and make baseless allegations about her ability to manage the estate. In such circumstances, the duties of loyalty and fairness are understandably strained. Yet honoring those obligations and remaining fair is of the utmost importance, if only to protect the P.R. from personal liability to an adverse party (that estate was settled without issue and our client did a commendable job).
Conflicts of interest often arise when dealing with real estate. Family members of the deceased often feel a sense of entitlement to a family home and balk at the idea of having to pay fair market value if the need to sell arises. Take, for instance, the common situation where a decedent leaves only real estate (no cash) and the property therefore must be sold to pay claims, taxes and other costs. The P.R. may want to keep the house “in the family” and certainly has the right to do so by purchasing the property, but this must be undertaken with caution. As a fiduciary, the P.R. must maximize the sale price on behalf of the estate for both beneficiaries and creditors. As an individual, the person serving as P.R. would normally hope to pay the lowest possible price for the property. Consequently, there is a conflict inherent in the P.R. purchasing the house from the estate. The P.R. must proceed with caution, hopefully on the advice of an attorney, to protect against claims of giving him or herself a “sweet-heart deal” at the expense of the estate.
If you are nominated to serve as the P.R. in a Will or are appointed and have questions about negotiating these or many other tricky situations, please call us: 617-737-9100.
