Personal Representative vs. Trustee

Man meeting with financial advisor at home about retirement planning

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In a previous post, I explained the estate-planning term "trustee." In this post, I explain the term "personal representative," also known as an executor, in the context of state planning. If an estate plan includes a revocable living trust, a legal entity created to hold ownership of an individual's assets, or another type of trust, those concerned should understand the fundamental differences between these two roles. Both are types of "fiduciaries" with a responsibility to act in the best interests of the estate and its beneficiaries, but each plays 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 of their 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 the person stated who or what entity they wanted to serve as personal representative, the probate court judge will most likely honor that wish 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 is 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 the trustmaker/original trustee should become incapacitated to the point where they can no longer manage the trust or their own affairs. The advantage of a revocable trust over a last will or testament is that the details of the estate are shielded from public consumption.

When a trustmaker creates an irrevocable trust, the individual must step aside immediately upon its formation. The trustmaker cannot act as their own trustee. Another party must be named. 

Ideally, an estate will avoid probate, which can be time-consuming and costly. If this is the case, any heirs will not need a personal representative at all if there is 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.