Personal Representative vs. Trustee

Estate Planning
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Yesterday, I posted on the estate-planning term of the week: "trustee." Today's term is "personal representative," also known as an executor. If your estate plan includes a revocable living trust or another type of trust, you should understand the fundamental differences between these two roles. Both are types of "fiduciaries," owing a responsibility to act in the best interests of the estate and its beneficiaries.

But they each play a very different role in an estate plan.

A Personal Representative 

A personal representative is appointed by a probate court judge to oversee the administration of an estate when someone dies with or without a will and has not transferred all his property into a living trust. The personal representative can be a person, an institution such as a bank or trust company, or a combination of both. If the decedent had a last will and testament in which he named the person or entity he wanted to serve as personal representative, the probate court judge will most likely honor his wishes and appoint this individual.

Otherwise, if the decedent did not leave a will, state law dictates who the probate judge must appoint to serve as the personal representative. In most states, it's the surviving spouse or another close family member. The personal representative of an "intestate" estate -- one without a valid will -- is commonly called the estate's "administrator." 

A Trustee 

A trustee is named by an individual who creates a living trust in much the same way a testator -- the person writing a will -- can name a personal representative for his estate. The person who creates a trust is called the trustmaker, or sometimes the grantor.

The trustee oversees day-to-day management of property owned by the trust for the benefit of its beneficiaries.

As with a personal representative, the trustee can be a person, an institution, or both may serve as co-trustees. The trustmaker, trustee, and beneficiary of a revocable living trust are often the same person. Additional beneficiaries are also typically named to inherit from the trust when the trustmaker dies. 

Revocable trusts also typically name one or more successor trustees, someone to step in and assume control of the trust and its assets when the trustmaker/original trustee dies, or if he should become incapacitated to the point where he can no longer manage the trust or his own affairs. 

When a trustmaker creates an irrevocable trust, he must step aside immediately upon its formation. He cannot act as his own trustee. Another party must be named. 

Ideally, your estate will avoid probate, and your heirs will not need a personal representative at all if you have a fully-funded living trust

NOTE: State and local laws change frequently, and the above information may not reflect the most recent changes. Please consult with an attorney for current legal advice. The information contained in this article is not legal advice and is not a substitute for legal advice.