Who Is an Administrator?
An administrator is a court-appointed individual who handles all remaining financial matters for a decedent—the person who has died—during probate. 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.
- An administrator is an individual appointed by the court who is responsible for executing a decedent's estate.
- An administrator is responsible for settling all financial matters–including outstanding debt, expenses, and other obligations–related to a decedent's estate.
- States have different criteria outlined in their probate codes for choosing administrators.
- Administrators are chosen by a court when the decedent has not named an executor in their will or if the executor cannot carry out the responsibilities.
- The term "administrator" is used in various other contexts, such as state administrators, pension plan administrators, and third-party 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.
In many wills, the decedent will set aside a specific amount of cash or assets to be used as compensation for the administrator or executor.
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.
Other Types of Administrators
The term "administrator" is a common word with different meanings depending on the situation. Some uses are as follows:
Pension Plan Administrator
A pension plan administrator is an individual or an investment management company that is responsible for the management of a retirement account or pension plan.
The plan administrator ensures that the funds are invested appropriately and with the right degrees of risk as well as collecting and distributing funds from/to the beneficiaries.
Some of the responsibilities of a pension plan administrator include enrolling company employees, calculating the benefit amounts, ensuring all plan information is accurate, and that the funds are being invested in risk-appropriate assets.
A third-party administrator is any company that provides specific services on behalf of another company. A third-party administrator is one that is usually hired to complete operational tasks, including the administration of employee benefits, such as a 401(k) plan.
Third-party administrators are far-ranging in their types but can be contracted to assist with health insurance, commercial liability insurance, retirement planning, other investment services, and audits. Third-party administrators are primarily used by companies as a way to outsource a variety of administrative functions.
A state administrator is a government representative that enforces state regulations related to the securities industry. The Securities and Exchange Commission (SEC) enforces federal securities law while the Uniform Securities Act allows states to set their own laws.
A state administrator performs many of the same actions as the SEC, such as regulating companies and individuals, granting or suspending licenses, and generally enforcing securities law.
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.
What Is the Difference Between an Administrator and an Executor?
An administrator and an executor perform the same function; the handling of all remaining financial matters for a decedent during probate. The difference is that an administrator is appointed by the court if the decedent has not named an executor in their will or if the executor is not able to carry out the required responsibilities.
How Long Does It Take to Be Appointed Administrator of an Estate?
It typically takes between six to eight weeks to receive the appropriate documentation to act as the administrator of a decedent's estate. The document needed is the "Letter of Administration" and has to be applied for.
How Much Does an Administrator of a Will Get Paid?
The amount an administrator gets paid depends on the state as well as the size of the estate. In California, for example, for an estate that is valued under $100,000, an administrator typically receives 4% of the estate's value. If the estate is valued between $100,000 and $25 million, the administrator can claim a specific percentage. If the estate is valued at over $25 million, then the court will decide the appropriate compensation.
Can an Administrator of an Estate Be a Beneficiary?
Yes, an administrator of an estate can be a beneficiary. This is common. For example, if an individual passes, then the person's spouse, who will most likely be the beneficiary, can also act as the administrator of the estate.