How Probate Works
March 23, 2023 · Marc Cormier
Fiduciary Responsibility: What Personal Representatives Must Know
When you serve as a personal representative of an estate, you are held to a fiduciary standard. This is the highest standard of care recognized under the law, and it carries real consequences for violations. Understanding what this means in practice is essential for anyone responsible for selling real estate during probate.
Duty to All Beneficiaries
The personal representative's fiduciary duty extends to all beneficiaries equally. You cannot favor one heir over another, regardless of personal relationships or circumstances. Every decision about the estate must be defensible as being in the best interest of the estate as a whole, not any individual beneficiary.
Duty of Loyalty and Care
When selling estate assets, the personal representative must exercise special care and loyalty to the beneficiaries. This means obtaining fair market value, marketing the property appropriately, and making decisions that maximize the estate's return. Selling below market value, accepting the first offer without proper marketing, or making decisions based on convenience rather than value can all constitute breaches of fiduciary duty.
No Self-Dealing
The personal representative cannot use the position to benefit themselves or any other interested party. If the PR wants to purchase estate property, they must disclose the interest, obtain court approval, and ensure the estate receives fair market value. Any transaction with an interested party requires heightened scrutiny and transparency.
Duty to Protect Assets
The personal representative must protect estate assets from loss or damage. This includes maintaining insurance coverage on real property, securing vacant homes, managing bank accounts, and taking reasonable steps to prevent deterioration. The PR who fails to maintain insurance on a vacant property, for example, could be personally liable if the property is damaged.
Do Not Harm the Assets
The personal representative must not harm assets by selling them too cheaply, choosing inferior options, or making unauthorized improvements. Every expenditure must be reasonable, documented, and defensible. The decision to invest in repairs before selling, for example, should be based on a cost-benefit analysis, not personal preference.
Court Approval for Real Property
In most jurisdictions, the personal representative must seek probate court approval before transferring title to real property. This requirement ensures the sale is conducted properly and at fair market value. The court will review the terms of the sale and the process used to market the property.
Work With Professionals, But Maintain Judgment
The personal representative should work with attorneys, accountants, real estate agents, and other professionals. However, no single professional understands all aspects of probate real estate. The PR must maintain independent judgment and cannot blindly follow the advice of any one advisor. The ultimate responsibility for decisions rests with the personal representative.
The Five Pillars of Fiduciary Duty: A Maryland Framework
Maryland law recognizes five core fiduciary duties that every personal representative must understand. Knowing these five pillars helps you evaluate every decision you make.
Duty of Care. You must manage the estate with the same level of care that a prudent person would use when managing their own affairs. This means making informed decisions, not impulsive ones. Before selling real estate, you must understand the market, the property's condition, and the financial implications.
Duty of Loyalty. You must act solely in the best interests of the estate and its beneficiaries. You cannot use your position for personal gain. If you have a conflict of interest, such as wanting to buy the property yourself, you must disclose it fully and seek court approval.
Duty to Inform and Report. You must keep beneficiaries reasonably informed about the estate's administration. In Maryland, the Register of Wills requires a formal accounting, but you should also provide regular updates to the heirs. Transparency prevents disputes and builds trust.
Duty to Account. You must be able to account for every dollar that comes into and goes out of the estate. This means maintaining a separate estate bank account, keeping receipts for all expenses, and documenting every financial decision. The court will review your accounting before the estate can be closed.
Duty of Impartiality. You must treat all beneficiaries fairly, regardless of your personal relationships with them. If one beneficiary wants to sell the house and another wants to keep it, you cannot favor either side. The decision must be based on what is best for the estate as a whole.
Maryland-Specific Fiduciary Rules
Maryland has specific requirements that personal representatives should understand. You must file an inventory of estate assets within 90 days of appointment. The inventory must include a professional appraisal of real property. If you fail to file on time, the court may require a formal administration with more oversight and higher fees.
Additionally, Maryland requires that the personal representative open an estate bank account within 30 days of appointment if the estate holds cash or receives income. The estate account must be separate from any personal account. All proceeds from the sale of real estate must go into this account before being distributed to beneficiaries.
In a Maryland case I worked on in Montgomery County, a personal representative deposited $120,000 in estate sale proceeds into her personal checking account. While she intended to distribute the funds correctly, the commingling created a legal issue. The beneficiaries questioned whether she had used estate funds for personal expenses, and the court required a forensic accounting. The accounting cost the estate $8,000, all because of a decision that seemed convenient at the time.
What Happens When You Breach Fiduciary Duty
The consequences of a fiduciary breach in Maryland can be severe. Beneficiaries can petition the court to remove the personal representative, which delays the estate and creates additional legal costs. The court can surcharge the personal representative, requiring them to personally reimburse the estate for any losses caused by the breach. In extreme cases involving fraud or self-dealing, the court can refer the matter for criminal prosecution.
The most common fiduciary breach I see in Maryland probate real estate is selling the property without proper marketing, often to a family friend or neighbor at a below-market price. The personal representative thinks they are helping someone they know, but they are actually shortchanging the other beneficiaries and exposing themselves to liability. Always market probate real estate openly and professionally, even if you think you already have a buyer.
Maryland Probate Tip
Maryland Probate Tip
In Maryland, if you are the personal representative and you want to purchase estate real estate yourself, you must petition the court for approval before the sale and disclose your interest as a buyer. The court will require an independent appraisal and may order that the property be marketed to ensure the estate receives fair market value. Buying estate property as a PR is not prohibited, but it requires full transparency and court oversight. Never try to buy estate property without court approval.
Marc's Advice
Marc's Advice
I tell every personal representative I work with the same thing: imagine that every decision you make will be reviewed by a judge, a roomful of beneficiaries, and their attorneys. Because it may be. If you would not feel comfortable explaining a decision in that room, do not make it. This standard sounds intimidating, but it actually makes decisions easier because it gives you a clear framework. When in doubt, ask your probate attorney before acting. A five-minute phone call can prevent a year-long legal dispute.
If This Were My Family
If This Were My Family
If my own brother were appointed personal representative for our father's estate in Howard County, I would sit him down and say: "You are now legally responsible for every decision about Dad's money and his house. If you make a mistake, you can be personally sued. Here is what you need to do. Open an estate bank account tomorrow. Do not put a single dollar of estate money into your personal account. Get a probate real estate agent who has done this before. And before you make any significant decision, ask yourself: would I be comfortable explaining this to a judge?" Fiduciary duty sounds like a scary legal term, but it is really just about being honest, careful, and transparent.
If you are a personal representative navigating a real estate sale during probate, reach out for guidance on fulfilling your fiduciary obligations while achieving the best outcome for the estate.
For a full breakdown of your duties as PR, read the Personal Representative Guide to Administering an Estate. For a broader overview of how probate works in Maryland, see the Complete Guide to Probate in Maryland.
Legal Note
For legal questions about your responsibilities as a Personal Representative, consult a competent Maryland probate attorney.
Legal Note
Court requirements vary depending on the circumstances of the estate. Consult your probate attorney for guidance.