ESTATE PLANNING AND ADMINISTRATION IN THE 21ST CENTURY
by
Kristen Hodeen Robinson, Esquire
Courtesy Law, PC
3419 Virginia Beach Blvd. #217
Virginia Beach, Virginia 23452
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(757) 321-8217
I. ESTATE PLANNING
A. Estate & Inheritance Taxes:
1. Federal Estate Tax
i) On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act (ATRA).
ii) On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA).
iii) Under the TCJA, the federal estate tax personal exemption, which is the amount any one person can transfer at death to people other than their spouses or to charity, was set at $10,000,000, indexed for inflation, until January 1, 2026, at which time the personal exemption reverts back to $5,000,000, indexed for inflation. As such, the personal exemption is $13,610,000 for decedent's dying in 2024. The personal exemption was $12,920,000 for decedent's dying in 2023.
a) Transfers to spouses, whether outright, through joint with survivorship or by beneficiary designation; are subject to the Unlimited Marital Deduction.
b) Transfers to charities are subject to the charitable deduction.
iv) A married couple with a combined gross estate less than $13,610,000 can protect their assets from federal estate tax without utilizing both spouses’ personal exemptions, and thus revocable living trusts may not be necessary.
v) The ATRA also made permanent “portability” which allows a surviving spouse to utilize a deceased spouse’s personal exemption in the event that is necessary. This requires that an election be made on a timely and properly filed Form 706 U.S. Estate Tax Return.
vi) The rate of federal estate tax on assets in excess of personal exemption is 40%.
vii) Gross Estate Includes:a. Real Estate
b. Face Value of Life Insurance Policies
c. Value of Retirement Accounts
d. Value of Non-Retirement Investment Accounts
e. Bank Accounts
f. Annuities
g. Tangible Personal Property
h. Value of Business Interests
i. 50% of Value of Assets Owned Jointly With Spouse
j. Determined Percentage of Assets owned Jointly with Third Party
k. Estate Tax is a tax on the right to transfer, and as such all assets are included
2. Virginia has No Inheritance Tax, which is a tax on the right to receive property from a decedent’s estate. Out of state beneficiaries do not pay an inheritance tax on assets received from a Virginia decedent.
3. Virginia Estate Tax
Repealed. But this is in flux and could change at any time now that the federal estate tax rate has been made permanent.
4. Gift Tax
i) Unified with Estate Tax. Gifts made during life that utilize personal exemption reduce personal exemption available at death.
ii) Same personal exemption amount and tax rate.
5. Generation Skipping Transfer Tax
i) Additional tax on transfer to persons 2 or more generations below the decedent or 37.5 years younger.
ii) GST Tax Exemption is also $13,610,000 with a rate on the excess of 40%.
6. Annual Exclusion
i) Each person has the right to gift up to $18,000 per person per year to any and as many persons as they choose.
ii) Each person can also pay medical and education expenses for the benefit of another person in an unlimited amount as long as the person makes payments directly to the provider (e.g., physician or school).
B. Family Dynamics:
1. Estate Tax Issues
i) What is the value of the person’s gross estate for estate tax purposes?
ii) Is there charitable intent?
iii) Can annual gifting reduce the size of the gross estate?
iv) A married couple can protect up to $27,220,000 from federal estate taxes by proper planning (e.g. properly funded revocable trusts)
2. Beneficiary Issues
i) Minor Beneficiaries
ii) Special Needs Beneficiaries
iii) Substance Abuse Issues
iv) Desire to Provide for Several Generations
v) Real Estate
a. Desire to Keep in the Family
b. Unable to Sell
c. Desire for Person to Live on Property for Life, Etc.
C. Basic Estate Planning Documents:
1. Revocable Living Trust
i) Revocable living trusts are trusts created (and hopefully funded by re-titling assets into the name of the trust or naming the trust as the beneficiary) during a person’s lifetime with the person creating the trust as grantor, trustee and beneficiary.
ii) Married couples can preserve up to $27,220,000 from federal estate taxes by properly executing and funding revocable living trusts.
iii) Assets titled in the name of a revocable living trust are not probate assets.
iv) Revocable living trusts can be set up to provide for management of the assets titled in the name of the trust for the benefit of other beneficiaries after the death of the grantor.
v) During the grantor’s lifetime, the revocable living trust is like an “invisible box”. The grantor still has complete access to assets titled in the name of the trust and reports all income on his personal income tax returns the same as if he or she owned them in their individual names. The box only becomes solid when the person becomes incapacitated or dies, and the successor trustee begins managing the assets titled in the name of the trust.
2. Testamentary Trust
i) Testamentary trusts are trusts created inside a will of a decedent.
ii) Testamentary trusts go through probate every year the trust is in existence after the decedent’s death unless either the will provides for a waiver of inventory and accountings or all beneficiaries execute a waiver of inventory and accountings in accordance with Va. Code Section 64.2-1307(F).
iii) Revocable living trusts are preferable to testamentary trusts.
3. Pour Over Will
i) When a person executes a revocable living trust, they must also execute a pour-over will to revoke all prior wills and to specify that all probate assets not titled in the name of the revocable living trust during the decedent’s lifetime shall be “poured over” into the revocable living trust at death.
4. Simple Will
i) A simple will is any will that does not contain testamentary trust provisions.
ii) A simple will can provide for assets to go to anybody, including charities.
iii) Any will, in order to be valid in Virginia, must have 2 witnesses to the signature of the testator (person creating the will).
iv) A self-proving affidavit, also signed by the testator and the witnesses in the presence of a notary public, should also be used. Otherwise, the witnesses must be located and complete and sign a deposition regarding their witnessing of the signing of the will. If the witnesses cannot be located, then the will cannot be probated in Virginia. The deposition form is online.
5. Holographic Will – a will entirely in the testator’s own handwriting, which does not need to be witnessed or notarized. However, two people familiar with the testator’s handwriting will have to attest to that fact before the holographic will can be probated in Virginia.
6. Standby Revocable Trust with Simple/Pour Over Will
i) Standby revocable trust is useful for couples who have young children or beneficiaries for whom assets should be managed if both husband and wife die, but there is no need for revocable living trusts that incorporate planning for federal estate taxes.
ii) Wills provide that all probate assets go to the surviving spouse, but if there is no surviving spouse, then all probate assets “pour over” into the standby revocable trust.
iii) The standby revocable trust is unfunded until the death of the second spouse.
iv) Assets should be titled to provide beneficiary designations to the standby revocable trust behind the joint ownership of the spouses so that if one spouse dies, the asset belongs to the surviving spouse, but if both die, the successor trustee of the standby revocable trust can collect the assets without going through probate.
v) The standby revocable trust should also be the contingent beneficiary of life insurance policies, with the spouse being the primary beneficiary.
vi) Retirement accounts should generally be handled separately.
7. Durable Power of Attorney for Financial Matters (Chapter 16 of Va. Code Title 64.2)
i) A durable power of attorney allows a person to appoint an agent to mange financial matters for that person if the person is unable or unwilling to do so.
ii) A durable power of attorney should name both a primary and a successor agent in case the primary agent is unavailable to act.
iii) A springing durable power of attorney only takes effect upon incapacity of the person creating the durable power of attorney. This can cause hardship as it requires one, and often two, physicians to state in writing that the person is unable to manage his or her financial affairs.
iv) A non-springing durable power of attorney takes effect immediately once it is signed, and is a very powerful document. Under Virginia law, a copy of a durable power of attorney can be treated as an original, although most financial institutions will require a certificate stating that the original is still in effect.
v) Even if a person has a funded revocable living trust and a pour-over will, he or she should still execute a durable power of attorney for financial matters to handle matters relating to assets not titled in a revocable living trust or not covered by the revocable living trust such as the filing of personal income tax returns.
8. Advance Medical Directive (Va. Code Section 54.1-2984)
i) An advance medical directive allows a person to appoint an agent to make health care decisions for that person if the person is unable or unwilling to do so.
ii) An advance medical directive should name both a primary and a successor agent in case the primary agent is unavailable to act.
iii) An advance medical directive also generally contains the “living will” provisions regarding the use or withdrawal of extraordinary measures to prolong a person’s life in the event of persistent coma or terminal illness.
iv) An advance medical directive can also contain provisions regarding organ donation (Va. Code 32.1-289.2).
9. Statement of Tangible Personal Property (Va. Code Section 64.2-400)
i) A statement or list disposing of tangible personal property can be incorporated by reference into a will.
ii) The statement only needs to be signed and dated, not notarized or witnessed.
iii) A statement is better than listing items of tangible personal property in the will because the statement can be changed without having to re-execute the will itself.
D. Titling of Assets
1. Sole Name – assets titled in a person’s sole name with no surviving joint owner or no valid beneficiary designation are probate assets upon the death of that person.
2. Joint with Rights of Survivorship as at Common Law
i) Assets titled joint with rights of survivorship as at common law belong to the surviving joint owner upon the death of the first person to die.
ii) Assets titled simply as “joint” without specifying the rights of survivorship as at common law are actually held as tenants in common (without survivorship) under Virginia law (Va. Code Section 55-20.1).
3. Tenants by the Entireties (Va. Code Section 55-20.2) – assets titled as tenants by the entireties are owned joint with survivorship between a husband and wife, and are provided additional creditor protection.
4. Tenants in Common (Va. Code 55-20) – assets titled as tenants in common or as joint tenants (without specifying survivorship) are owned by the individuals separately, with their respective interests passing according to their own estate planning upon their death. There are no automatic rights of survivorship.
E. Beneficiary Designations
1. Life Insurance
i) Life insurance policies owned by the insured should have both primary and contingent beneficiaries.
ii) If a primary beneficiary predeceases the insured and there is no contingent beneficiary, the life insurance proceeds become probate assets.
iii) When doing federal estate tax planning with revocable trusts, or for a single person who has a revocable trust, generally the revocable trust of the insured person should be the primary beneficiary of the life insurance policies.
iv) When using a standby revocable trust, generally the surviving spouse should be the primary beneficiary and the standby revocable trust should be the contingent beneficiary of the life insurance policies.
v) If the insured’s estate planning does not include a revocable trust and a minor is a beneficiary of the life insurance policy, the beneficiary designation should read “John Doe, Custodian for Minor Doe under Va. UTMA (25)”. This will prevent the need for someone to petition to be guardian of the life insurance proceeds if the insured person dies while the beneficiary is still a minor.
2. Retirement Accounts
i) Retirement accounts should have both primary and contingent beneficiaries.
ii) If a primary beneficiary predeceases the insured and there is no contingent beneficiary, the retirement accounts becomes a probate asset.
iii) If a retirement account is a probate assets, there is no designated beneficiary and as such, the retirement accounts must generally be disbursed and all income tax consequences recognized within 5 years of the decedent’s death.
iv) In generally, a revocable trust should not be named as the beneficiary of retirement accounts.
v) If a beneficiary of a retirement account is a minor, the beneficiary designation should read “John Doe, Custodian for Minor Doe under Va. UTMA (25)”. This will prevent the need for someone to petition to be guardian of this retirement account if the owner of the retirement account dies while the beneficiary is still a minor.
vi) There are numerous exceptions and rules regarding retirement accounts that are beyond the scope of this outline.
3. Uniform Transfer on Death Act (Article 3 of Chapter 6 of Va. Code Title 64.2)
i) A person can add a “Transfer on Death” or “TOD” beneficiary designation to non-retirement investment accounts if such accounts are owned solely by that person or as joint tenants with rights of survivorship.
ii) A person can add a “Pay on Death” or “POD” to bank accounts if such accounts are owned solely by that person or as joint tenants with rights of survivorship.
iii) Upon the death of the owner, or the surviving joint owner(s), the accounts can then be collected by the named beneficiary or beneficiaries without going through probate.
iv) If a beneficiary of a bank or investment account is a minor, the POD or TOD beneficiary designation should read “John Doe, Custodian for Minor Doe under Va. UTMA (25)”. This will prevent the need for someone to petition to be guardian of the account if the owner of the account dies while the beneficiary is still a minor.
4. Uniform Transfers to Minors Act (Chapter 19 of Va. Code Title 64.2)
i) A person may set up bank accounts or investments accounts for the benefit of a minor using the Uniform Transfers to Minors Act.
ii) A custodian will be named to manage the account during the minority of the child.
iii) A successor custodian should also be named in case the primary custodian dies before the minor attains 18 years of age.
iv) If an account is titled as a UTMA account and states that it is under Va. UTMA (21), then the account can be managed by the custodian until the minor is 21 years of age rather than 18 years of age.
v) Effective July 1, 2019, if an account is titled as a UTMA account and states that it is under Va. UTMA (25), then the account can be managed by the custodian under the minor is 25 years of age rather than 18 or 21 years of age.
vi) Transfers into UTMA accounts are considered gifts by the person making the transfer, and will utilize a portion of that person’s annual exclusion, or if the gift is in excess of $18,000 in any one year, a portion of that person’s personal exemption.
F. Real Estate
1. Virginia
i) Title to Virginia real property owned by one or more persons as joint tenants with rights of survivorship as at common law or by a husband and wife as tenants by the entireties passes to the surviving joint owner(s) or the surviving spouse by operation of law. No deed should be filed to recognize that in the public records.
ii) When the surviving joint owner(s) or surviving spouse sells the real property, the derivation clause in the deed will specify when the deceased joint owner or spouse died and state that titled vested in the surviving joint owner(s) or spouse by operation of law.
iii) Title to Virginia real property owned by one or more persons as tenants in common is a probate asset for the percentage owned by a decedent.
iv) Title to Virginia real property should generally be transferred into the revocable living trust for a couple who is doing federal estate tax planning with trusts or a single person who has a revocable living trust. Title should generally not be transferred to a standby revocable trust.
v) Transferring title of Virginia real property to a revocable living trust will not trigger the “due on transfer” clause in a deed of trust as such a transfer is an exemption under the Garn St. Germain Act.
vi) Virginia real property titled in the name of a revocable living trust is not a probate asset.
vii) Effective July 1, 2013, title to real property can now be transferred to one or more named beneficiaries by the signing and recording in the appropriate Circuit Court Clerk's Office of a "transfer on death" deed. The "transfer on death" deed has no effect on the title of the owner or owners of the real property during the lifetime of the owner or owners, and is revocable.
2. Non-Virginia – always contact a licensed attorney in the state in which the non-Virginia real property is located to deal with title concerns, including re-titling non-Virginia real property into a revocable living trust to avoid probate in that state. If a person owns non-Virginia real property and is using a revocable living trust as part of his or her, or their, estate planning, the non-Virginia real property should be titled in the name of one or both of the revocable trusts to avoid probate in the state in which that non-Virginia real property is located.
II. ESTATE ADMINISTRATION
A. Initial Interview
1. DO NOT SET A QUALIFICATION APPOINTMENT WITH THE PROBATE CLERK UNTIL ASSETS AND DEBTS HAVE BEEN THOROUGHLY REVIEWED.
2. Obtain an original death certificate.
3. Probate Assets:
i) Assets titled solely in the decedent’s name.
ii) Life insurance policies for which there is no surviving or designated beneficiary.
iii) Retirement accounts for which there is no surviving or designated beneficiary (Note: some IRAs have beneficiaries designated automatically by contract if no specific beneficiary is named).
iv) Virginia real property titled solely in the decedent’s name or for which the joint owner predeceased the decedent.
v) Non-Virginia real property may require an ancillary administration in the state in which the real property is located.
vi) Either Virginia or non-Virginia real property titled as tenants in common (the percentage owned is a probate asset).
4. Non-probate Assets:
i) Assets titled jointly with survivorship or as tenants by the entireties.
ii) Bank accounts or non-retirement investment accounts with a valid “POD” or “TOD” beneficiary designation.
iii) Life insurance with one or more surviving beneficiaries.
iv) Retirement accounts with one or more surviving beneficiaries (or that have automatic contractual beneficiary designations).
v) Virginia and non-Virginia real property titled joint with survivorship as tenants by the entireties with a surviving joint owner or surviving spouse.
5. Don’t open a probate administration if the only probate assets are tangible personal property.
6. Debts:
i) Determine which debts are solely obligations of the decedent.
ii) Joint debts are generally the obligation of the surviving debtor.
iii) Deeds of Trust.
iv) Car liens.
v) Credit cards.
vi) Unsecured debts.
vii) Promissory notes.
viii) Medical bills.
ix) Unpaid personal expenses such as utilities, alimony obligations, back child support, etc.
7. BE CAREFUL OF INSOLVENT ESTATES (DEBTS EXCEED PROBATE ASSETS).
B. Real Estate
1. Virginia
i) Title to Virginia real property titled joint with survivorship or tenants by the entireties passes to the surviving joint owner or surviving spouse by operation of law.
ii) Title to Virginia real property titled solely in the decedent’s name “drops like a rock” through the probate estate to vest in the named beneficiaries under the will or based on the Virginia laws of descent and distribution (Va. Code Section 64.2-200).
iii) In general, an appraisal of Virginia real property should be obtained to determine the value for probate purposes and to establish cost basis; however, many times the real estate tax assessment value will be used instead.
iv) The proportionate value of Virginia real property owned as tenants in common by the decedent is a probate asset.
v) Obtain a copy of the most recent deed from the Clerk’s Office of the appropriate Circuit Court.
vi) Although title to Virginia real property “drops like a rock” through the probate estate to vest in the appropriate beneficiaries, this is subject to divestment by the Executor to bring title back into the probate estate to sell the real property if the probate estate is insolvent.
vii) If a will contains a direction to sell the Virginia real property, then title does not “drop like a rock” through the probate estate, but stays with the Executor for him or her to sell the Virginia real property and add the proceeds to the probate assets.
2. Non-Virginia
i) Title to non-Virginia real property titled joint with survivorship or tenants by the entireties passes to the surviving joint owner or surviving spouse by operation of law.
ii) Contact a licensed attorney in the state in which the non-Virginia real property is located to assist you.
C. Intestate Administration
1. An intestate administration is a probate administration for a decedent who dies without a valid will.
2. Real property and personal property that are probate assets in an intestate administration pass to the beneficiaries according to the Virginia laws of descent and distribution (Va. Code Section 64.2-200 and 64.2-201).
i) To surviving spouse unless the decedent is survived by one or more children not of the surviving spouse, in which case one-third passes to the surviving spouse and two-thirds passes to the decedent’s children and their descendants.
ii) If there is no surviving spouse, then to the decedent’s children and their descendants.
iii) If there are no children or descendants, then to the decedent’s parents.
iv) If there are no parents, then to the decedent’s brothers and sisters and their descendants.
v) Virginia law keeps seeking back through the family tree.
3. A person qualify on an intestate estate is called the Administrator.
4. The Administrator will not have fiduciary powers unless a petition is filed in the Circuit Court to obtain such powers.
i) Can be an issue if the estate is insolvent and owns real property that needs to be sold to pay the debts of the decedent.
D. Testate Administration
1. A testate administration is a probate administration for a decedent who dies with a valid will.
2. A person qualifying on a testate estate is called the Executor.
3. A well drafted will should incorporate by reference the fiduciary powers for the Executor in Va. Code Section 64.2-105.
E. Surety on Fiduciary Bond
1. A well drafted will waives surety on an Executor’s fiduciary bond, in which case the fiduciary bond is based on the Executor’s personal recognizance.
2. Surety is an insurance policy based on the value of the probate assets.
3. Surety is required on an intestate administration.
4. Surety is required on a testate administration when the Executor is a non-Virginia resident and no Virginia resident also qualifies.
5. Surety requires that an insurance agent be contacted prior to the probate qualification appointment to obtain certain information from the person who will be qualifying, and that the insurance agent be present at the qualification appointment to sign certain probate documents.
6. Surety can also be waived if all persons who are the residuary beneficiaries of a probate estate also qualify as the Executors or the Administrators.
F. Virginia Small Estate Affidavit (Article 1 of Chapter 6 of Va. Code Title 64.2)
1. Qualification of an Executor or Administrator is not required if the entire personal probate estate of the decedent, wherever located, does not exceed $50,000 (Va. Code Section 64.2-601).
2. If the decedent had a will, then the will and a List of Heirs (the names and addresses of the heirs-at-law under the Virginia laws of descent and distribution) must be recorded with the probate clerk.
3. If the decedent had no will, then the List of Heirs is recorded.
4. Bank and investment accounts can then be collected by the claiming successor after at least 60 days has passed since the decedent’s date of death.
5. The claiming successor will be the appropriate beneficiaries under the will or under the Virginia laws of descent and distribution.
6. Useful if the estate is insolvent (even if the decedent owned real estate) because if no probate administration is opened, then the creditors have no assets upon which to present their claims. Title to the real estate will simply vest in the beneficiaries’ without going through probate.
G. Short Form Probate
1. Qualification of an Executor or Administrator is required.
2. This form of probate administration applies when all persons who residuary beneficiaries under a will, or are the beneficiaries under the Virginia laws of descent and distribution, also qualify as Executors or Administrators. One or more persons who are not residuary beneficiaries can also qualify if necessary.
3. Basically, Virginia has decided that if all persons who are to receive the probate assets are also the persons who are managing the probate administration, there is no need for a complete Settlement of Accounts to be prepared.
4. Notices of Probate, the Affidavit of Notice and the Inventory still need to be prepared.
5. Short form probate can significantly reduce the time and expense necessary to complete a probate administration.
H. Full Probate
1. Qualification of an Executor or Administration is required.
2. Notices of Probate, the Affidavit of Notice, the Inventory and the Settlement of Accounts need to be prepared.
I. Other Forms of Probate – there are other variations of probate administration based on very specific circumstances that are beyond the scope of this outline. Check Chapter 5 of Va. Code Title 64.2.
J. Taxpayer Identification Number (TIN)
1. If short form or full probate is required, the Executor or Administrator will need to obtain a Taxpayer Identification Number for the probate estate. This is also called an Employer Identification Number. The easiest way to obtain a TIN is through the Internal Revenue Service’s website. You will need a copy of the decedent’s death certificate, the Social Security Number and address for at least one of the Executors or Administrators and some other basic information on the decedent. Always print the summary information and the assignment of TIN, and save the assignment as a file.
2. The TIN will be used to open bank and investment accounts in the name of the probate estate.
3. Federal and Virginia fiduciary income tax returns may need to be filed on behalf of the estate annually.
4. An estate can use a calendar year end or a fiscal year end up to the end of the month prior to the month in which the decedent died. Consult a tax accountant regarding whether to use a calendar year or a fiscal year.
K. Notice of Probate and Affidavit of Notice (Va. Code 64.2-508)
1. Within 30 days after qualification, an Executor or Administrator must generally provide Notices of Probate to the surviving spouse of the decedent, heirs at law of the decedent, and all beneficiaries under the will of a decedent.
2. The forms will generally be provided by the probate clerk at the qualification appointment.
3. Once the Notices have been sent, the Executor or Administrator must file an Affidavit of Notice with the Clerk’s Office (filing fee is $18) stating to whom and when the Notices of Probate have been provided.
4. The Commissioner of Accounts will not approve the Inventory until the Notices of Probate have been sent and the Affidavit of Notice has been filed.
5. Depending on who is entitled to receive the Notices of Probate and who is qualifying as Executor or Administrator, all of these documents may be completed and filed at the probate qualification.
K. Inventory
1. Within 4 months after qualification, an Executor or Administrator must generally file an Inventory with the Commissioner of Accounts assigned to review the administration.
2. The form and instructions, including the filing fee schedule, will generally be provided by the probate clerk at the qualification appointment.
3. All probate administration forms are also available online at http://www.courts.state.va.us/forms/circuit/fiduciary.html.
4. Part 1:
i) All probate assets except those that specifically belong in Parts 2, 3, 4 and 5.
ii) Use date of death values and provide account numbers and asset descriptions.
iii) In general, the value of household goods and personal belongings can be estimated and need not be listed individually.
5. Part 2:
i) Bank accounts ONLY that have a surviving joint owner or designated and surviving POD beneficiary.
ii) Part 2 DOES NOT include investment accounts with a surviving joint owner or designated and surviving TOD beneficiary.
iii) See Va. Code Section 64.2-515 – joint accounts may be claimed by an Executor or Administrator in certain limited situations.
iv) Provide the name of the surviving joint owner(s) or POD beneficiaries in the description.
6. Part 3:
i) Virginia real property titled solely in the decedent’s name.
ii) Virginia real property owned partially by the decedent as tenants in common.
iii) This section is for Virginia real property ONLY over which the Executor has a power of sale by the incorporation of that power in the will either by reference to Va. Code Section 64.2-105 (formerly 64.1-57) or by specific statement of that power and/or a direction to sell the Virginia real property.
iv) If an Administrator of an intestate estate has petitioned for and obtained the power to sell real property from the Circuit Court, then the Virginia real property would be listed in this section.
7. Part 4 - Same as Part 3 except either the will does not contain the power to sell or this is an intestate estate on which the Administrator has not sought and received the power of sale from the Circuit Court.
8. Part 5 – All real property not located in Virginia.
9. Date of death value should be used for all probate assets.
i) Obtain date of death value for marketable securities from financial advisor.
ii) Obtain date of death value for bank accounts from statement for the month of the decedent’s death.
iii) Generally an appraisal should be obtained for all real property, although often the real estate tax assessment is used instead.
iv) An estimate based on “estate sale” value rather than replacement value can be used for tangible personal property.
v) Obtain value for vehicles from Kelley’s Blue Book. www.kbb.com.
vi) Collectibles and other valuable items of tangible personal property should also be appraised (coins, paintings, etc.).
10. File one original and two copies of the Inventory with the Commissioner of Accounts.
L. Settlement of Accounts (Article 9 of Chapter 5 of Va. Code Title 64.2)
1. Within 16 months after qualification, an Executor or Administrator must file a Settlement of Accounts (also known as an accounting) with the Commissioner of Accounts assigned to review the administration. The earliest that an accounting can be filed with the Commissioner of Accounts is 6 months after the date of qualification.
2. The accounting covers all receipts, disbursements, distributions, gains, losses and adjustments for the first 12 months of the probate administration.
3. In many cases the first accounting will also be the final accounting.
4. A final accounting shows ending assets on hand are zero.
5. Although the form for the Account Summary will generally be provided by the probate clerk, and is available online, the supporting details can be presented in many different ways.
6. All original account statements, supporting invoices for disbursements, receipts supporting distributions to beneficiaries and any other supporting documentation must be filed with the accounting. Copies of cancelled checks are also supposed to be filed with the accounting, but because many banks will no longer provide these without a fee per check, many Commissioners of Accounts have relaxed this requirement.
7. The filing fee will be based on the value of the beginning assets on hand (from the Inventory) plus all receipt, gains and increases through adjustments.
8. File one original and two copies of the Account Summary and supporting accounting details with the Commissioner of Accounts. Do not file copies of the supporting documentation, but keep a copy of all supporting documentation for your files.
9. A more detailed discussion of the accounting is beyond the scope of this outline.
M. Statement in Lieu of Settlement of Accounts
1. Instead of an accounting, a Statement in Lieu of Settlement of Accounts can be filed anytime after 6 months from the date of qualification when short form probate is available.
2. The filing fee to the Commissioner of Accounts is $168. File one original and two copies of the Statement in Lieu of Settlement of Accounts with the Commissioner of Accounts.
3. Although the form for the Account Summary will generally be provided by the probate clerk, it is also available online.
N. Commissioner of Accounts
1. The Commissioner of Accounts is an attorney who has been appointed by the Circuit Court to review probate administrations.
2. The probate clerk will assign the probate administration to a particular Commissioner of Accounts at qualification.
3. ALWAYS MAKE FRIENDS WITH THE COMMISSIONER OF ACCOUNTS’ ASSISTANTS!
4. In the event that you cannot file an Inventory or accounting by the due date, you should request in writing that the Commissioner of Accounts grant an extension, usually 30 days. The Commissioner of Accounts will almost always grant the extension as long as it is reasonable.
5. Also consult the Commissioner of Accounts before allowing the Executor or Administrator to do anything unusual or if there are any questions about whether a certain transaction will be allowed.
O. Insolvent Estates
1. An estate that has debts that exceed assets is insolvent.
2. Virginia law provides the order in which costs of administration and debts must be paid in an insolvent estate (Va. Code Section 64.2-528).
3. Before a probate qualification appointment is made, a determination must be made regarding whether an estate is insolvent.
i) Increased potential liability to the Executor or Administrator if debts paid out of order.
ii) May be able to avoid qualification by using Virginia Small Estates Affidavit.
4. A more detailed discussion of insolvent estates is beyond the scope of this outline.
P. Debts & Demands Hearing (Va. Code Section 64.2-550)
1. If an estate is insolvent or has contested debts, one way to resolve what is paid is to request that the Commissioner of Accounts hold a debts and demands hearing.
2. Generally the debts and demands hearing is requested by letter to the Commissioner of Accounts when filing an accounting.
3. The Commissioner of Accounts will publish notice of the debts and demands hearing in an appropriate newspaper.
4. Notice of the debts and demands hearing must also be provided to all known creditors by the Executor or Administrator.
5. After the debts and demands hearing, the Commissioner of Accounts will issue a report outlining his recommendations for final disbursements and distributions. Creditors and beneficiaries may file exceptions to this report if they disagree.
6. A more detailed discussion of a debts and demands hearing is beyond the scope of this outline.
Q. Motion to Show Cause Against Distribution (Va. Code Section 64.2-553)
1. Upon confirmation of a report from the Commissioner of Accounts, the Executor or Administrator will file a motion with the Circuit Court to order payment of the probate assets in accordance with the report.
2. Creditors and beneficiaries may appear at the hearing.
3. Once the Circuit Court has entered its order on the motion, the Executor or Administrator makes the disbursements and distributions according to that order.
4. A more detailed discussion of a motion to show cause against distribution is beyond the scope of this outline.
R. Fiduciary Income Tax Returns – an Executor or Administrator may be required to file fiduciary income tax returns for the probate estate. The Executor or Administrator should consult with a tax accountant regarding the necessity for filing such returns.
S. Final Personal Income Tax Returns of Decedent – the Executor or Administrator is generally responsible for filing the final persona income tax returns for the decedent. The Executor or Administrator should consult with a tax accountant regarding the necessity for filing such returns. If possible, the same tax accountant who is preparing the final personal returns for a decedent should file the fiduciary income tax returns for the probate estate.
T. Administration of Revocable Trusts – many of the same general valuation rules apply to the administration of a revocable trust as to a probate estate, except that a revocable trust does not require all of the various probate documents to be filed with the Commissioner of Accounts. A more detailed discussion of administration of revocable trusts is beyond the scope of this outline.
This summary regarding Estate Planning and Administration in the 21st Century was prepared by Courtesy Law, PC, and is intended to provide general information about Estate Planning and Administration matters, and not specific legal advice. For more information, consult with a competent estate planning attorney. Ms. Robinson may be contacted at (757) 321-8217.
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All rights reserved.
