Administrator

Who Is an Administrator?

An administrator is a court-appointed individual who handles all remaining financial matters for a decedent during probate. A decedent is a person who has died. The administrator organizes all the pieces of the decedent's estate and then settles outstanding debt, expenses and other obligations. They also distribute all remaining assets according to the decedent's will, or if there was no will (a situation called intestacy), according to a specific state's intestate succession laws.

Understanding Administrators

An administrator is also referred to as an executor. However, legally-speaking, an administrator is appointed by a court when the decedent has not named an executor in their will or if a named executor refuses or is unable to assume the responsibilities. A court cannot force a named executor to fulfill their duties.

Depending on the state, a decedent's estate administrator is chosen based on different criteria. For example, one of the criteria specified in the state of Pennsylvania's probate code is that the administrator is chosen based on the size of their interest in a decedent's estate rather than their closeness with the deceased. Other persons who may be considered are guardianship agencies (in cases where the decedent was incapacitated) or creditors. Persons under 18 years of age, corporations, and individuals who have an unfit background (such as a criminal record) are not considered when appointing an administrator.

The probate proceeding begins with the selection of the administrator. Once appointed, the administrator receives Letters Testamentary issued by the court, authorizing them to discharge outstanding financial matters. An administrator is compensated for their services based on the quality of their work and results. They are required to submit a detailed accounting of time spent and fee expenses to get paid. Professional administrators are also available for hire. These administrators generally charge a fixed fee for their services but may negotiate their rates for estates that are in excess of $1 million.

An Administrator's Duties

One of the first things that an administrator must do is obtain a tax identification number so they can file with the IRS. Then, the administrator is tasked with gathering up all of the documents and personal files that encompass the financial dealings and transactions of the decedent: bank account records, brokerage statements, credit card statements, insurance claims, tax notices, medical expense invoices, automobile financing statements, etc.

If the decedent owned a business, the administrator takes legal title to the assets of the business and must hire a third-party appraiser to value the assets before the administrator liquidates them, pays all the business's liabilities, and finally, closes the business down. Independent valuation services must also be retained to ascertain fair market prices for real estate, art or other illiquid personal assets.

The administrator determines if there are any tax obligations with federal and state authorities and settles them, in addition to settling any liabilities with other parties that had outstanding claims when the person died. An administrator must take particular care to clear out all of the decedents' tax claims because they can, in certain instances, be held personally responsible for unpaid taxes. 

After all debts and expenses have been settled, any remaining assets are distributed by the administrator to named beneficiaries in a will. If there was no will left behind by the decedent, the assets are distributed in accordance with state procedure.

Simple probate cases may take just a few months, while complex cases can take two to three years before they are concluded.

Example of an Administrator

Dmitri died without leaving a will and he had no surviving spouse or children. When he heard about Dmitri's death, Bob contacted the court to be appointed as his administrator. Bob applied to be Dmitri's administrator because he was a creditor to Dmitri and had loaned him funds amounting to $50,000 over the years.

Once the court approved his application, Bob set about finding more information about the state of Dmitri's finances. He inquired with Dmitri's bank and combed through his previous tax filings. Bob discovered that Dmitri did not have much money in his account but he did have a property holding that could help pay off his loan. He petitioned the court to sell off the property and settled Dmitri's tax liabilities and paid off the remaining creditors. He was also compensated by the court for his work.