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TO EACH EXECUTOR OR ADMINISTRATOR

OF A DECEDENT’S ESTATE

 

 

TABLE OF CONTENTS

 

 

I.        INTRODUCTION

II.      INITIAL PROCEDURES AT THE COURTHOUSE

III.    DUTIES OF EXECUTOR OR ADMINISTRATOR

IV.    THE INVENTORY

V.      THE ACCOUNTING

VI.     ALTERNATIVE TO ACCOUNTING(S)

VII.   UNKNOWN CFREDITORS AND DISPUTED CLAIMS

VIII.  FEES FOR EXECUTORS AND ADMINISTRATORS

IX.     PENALTIES FOR NONCOMPLANCE

X.      FORMS

 

 

 

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I. INTRODUCTION

 

The Clerk of the Circuit Court has entered an order appointing you as Executor or Administrator (The term Executor is used if the fiduciary’s authority is derived from a will. An Administrator is a fiduciary who qualifies when there is no will.  But: an Administrator c.t.a. is a fiduciary who replaces an executor. of the Estate of a Decedent.)  You qualified by making oath to well and truly administer the estate and by giving bond as required.  You are now a fiduciary, charged with the highest duty of care the law requires of any person, over the assets of your ward.

 

The Commissioner of Accounts is the person designated under law to supervise your work as fiduciary.  These instructions are general in nature and are not intended to completely set out the law.  We encourage you to seek the advice of a lawyer or an accountant, as appropriate.  Reasonable charges for their advice are properly expenses of the estate.  It is far easier to avoid errors altogether than it is to have to try to find a way to correct them later.

 

II. INITIAL PROCEDURES AT THE COURTHOUSE

 

            A. Notice and Affidavit. A fiduciary must give written Notice of his qualification to each of the Decedent’s closest relatives and/or beneficiaries named in the Will, which must be mailed or given to each such person within 30 days after qualification.  An interested person may waive notice.  Having given the required Notices (or if you fall within an exception to the Notice requirement), you should fill out and sign the Affidavit before a notary public or a clerk of the court, and return it to the Clerk’s Office. This document informs the Court that you have complied with all notice-giving requirements.  These forms are included with these Instructions.

 

            B. Recording fees and taxes.  At the time you qualify as fiduciary, you must give an estimate of the value of all of the assets the Decedent died owning.  The Clerk will assess a probate tax, based on the value of the assets reported either then or later.  Other standard fees will be payable to the Clerk of Court and to the Commissioner of Accounts when you make filings of Inventories and Accountings. 

 

            C. Bond and Surety.  You must be “bonded,” that is, you must give an assurance that you will be personally liable to persons interested if assets are lost because of your mis-handling of the estate.  “Surety” is the pledging of money or assets to guarantee your faithful performance.  Sometimes the law waives the formality of corporate surety, in which case you pledge your assets generally for your faithful performance.  Sometimes you must have corporate surety in the form of a bonding (insurance) company’s formal guarantee.

  

III. DUTIES OF EXECUTOR OR ADMINISTRATOR

 

            A. Separate accounts.  Immediately open a separate checking and, if appropriate, a

separate brokerage account, for all of your estate’s funds.  You may not borrow from the estate’s funds or mix the Decedent’s assets with your own or anyone else’s assets.  Make sure

you choose a bank that returns cancelled checks or provides a photocopy of the front of the check and a monthly bank statement. (See Va. Code §26-17.9(c)).  Near the end of your administration, there will be a month or more when the balance in the estate checking account will be very small but not zero.  Inform your bank of this and make arrangements for service charges to be waived for that period.

 

B.  Tax Identification Number.  Obtain and fill out a Federal SS-4 form and send it to the Internal Revenue Service.  They will issue you a tax identification number for the estate, which you will use on tax returns and give to banks and investment firms.

 

C. Assets v. Debts.  Once you have located and taken control of all of the Decedent’s assets, estimate as best you can the amount of the Decedent’s debts, including funeral expenses, medical bills and all other debts, taxes and expenses of administration that you will need to pay out.  If you don’t have enough assets to pay out the above, immediately contact an attorney who regularly practices probate law.  Your estate is probably “insolvent” – which, like bankruptcy, involves an extremely complicated set of rules about which creditors get paid, how much and in what order.  If you believe your estate might be insolvent, DO NOT PAY OUT OR DELIVER ANY ASSETS OR MONEY OF THE ESTATE TO ANYONE UNTIL RECEIVING PROFESSIONAL ADVICE.

 

D.  Notice. As required by Virginia Code §64.1-122.1, you are notified that: “As an executor or administrator of an estate, you are charged with the responsibility of filing any income, inheritance or estate tax returns required by state or federal law and an accounting of your handling of the estate.”

 

E. Ledger. You should keep a ledger, listing all receipts, including the date received, the payor, what it was for and amount.  Similarly, you should list all of your disbursements for expenses and distributions to your beneficiaries, by date paid, payee, what it was for and amount.

 

F. Records. Keep and preserve your paperwork: receipts, bills, deposit slips, memos, bank statements, cancelled checks, investment reports and any other significant material.  If real estate is sold by the estate, keep all of those records separately.

 

G. Real Estate.  Your power and authority over Decedent’s real estate must be sorted out.  An attorney’s advice on this matter is important to obtain.  Generally speaking, you have three different possibilities concerning the real estate. 

 

First: if the Decedent owned the property with another person “with right of survivorship,” the ownership of the property passes to the surviving co-owner under the “survivorship” clause of the deed.  It bypasses the estate, and you have no responsibility for it at all.

 

           Second: If the Decedent owned real estate individually but had no will, its ownership passed directly by operation of law to Decedent’s beneficiaries as determined by law, but with the condition that creditors may require the real estate to be sold to pay debts if necessary.  Otherwise, you have no responsibility for the real estate, and you should not spend the estate’s money to maintain the real estate.

 

            Third, the will may contain language specifying the disposition of real estate.  It can direct that the real estate be sold, in which case, you must sell it according to the terms of the will.  Or, the will might give you the power but not the direction to sell real estate.  That power may be contained in a reference in the will to Virginia Code §64.1-57, or it may be spelled out in detail.  If you are given the discretion to sell the real estate and wish to do so, we suggest you consult with the Office of the Commissioner of Accounts first.

 

IV. THE INVENTORY

 

            An Inventory form is found on this website.

 

Within four months from the date you qualify as fiduciary, you are obligated to file an Inventory with the Commissioner of Accounts.  An Inventory form is included with these Instructions, and you may make as many copies as you need.  A sample Inventory is also included.  The Inventory is a list of all the property or any interest therein, which the Decedent died owning, and its value as of the date of death.

 

            Referring to the top of the first page, the “court” is the Circuit Court for the City of Danville, and the  “Court File #” has been noted on your receipt, on the front of your copy of the will or on the accounting form you have been given.  If you can’t find it, just leave it off.

 

            Part 1. Should show a list of the personal property, including tangibles, bank accounts, stocks and bonds, CD’s and all other property except real estate owned by your Decedent and under your supervision and control.  Do not include survivorship bank or investment accounts here.

 

            Part 2. Should describe all bank or credit union accounts, both savings and checking, and CD’s  that your Decedent owned with survivorship with another person.  Keep in mind that you generally do not administer these accounts; they are the property of the surviving co-owner.  But creditors of the estate have the right to know what survivorship accounts there were, because a Virginia statute permits creditors to require that they be used to pay Decedent’s debts if necessary.

 

            Part 3. Should describe any Virginia real estate owned by your Decedent (but not survivorship property) over which you have the power of sale.  You can describe this real estate as it is described on the real estate tax bill.  Whether you have the power of sale will depend on the grant of your authority by the Court.  If you are in doubt, consult counsel.

 

Part 4. Describes any other Virginia real estate, that is, any real estate in Virginia owned by your Decedent over which you do not have the power of sale.

 

            Part 5. Describes any real estate outside of Virginia owned by your Decedent.

 

            All fiduciaries must sign the Inventory, list their addresses and date it.  IF YOU CHANGE YOUR ADDRESS, IMMEDIATELY NOTIFY THE COMMISSIONER OF ACCOUNTS OFFICE.

 

            When you are ready to file the Inventory, call the Office of Commissioner of Accounts to ascertain what checks you need to attach.

            

V. THE ACCOUNTING

 

        An Accounting form is found on this website.

 

            Unless you fall within the exception described in VI. ALTERNATIVE TO ACCOUNTING(S), You must file an Account for Decedent’s Estate within sixteen (16) months from your qualification. 

 

The first (and perhaps the only) accounting you file covers the twelve (12) month period beginning with your qualification.  For each twelve-month period thereafter during which the estate has not yet been closed, you must submit an annual accounting. For example, if you qualified as Executor on April 15, 2002, the first accounting for the period April 15, 2002 through April 14, 2003 will be due at the Commissioner of Accounts’ office by August 15, 2003.  If this is not a final accounting, a subsequent accounting for the period April 15, 2003 through April 14, 2004 (or through the final date of activity in the estate) will be due by August 15, 2004. 

 

At the top of the first page, insert the “Court File #.” The Circuit Court in which you qualified is the Circuit Court of Danville.

 

            The Account Summary is the heart of the accounting.  You will attach to this paper various lists of items comprising the various Lines.

 

            Line 1.: In the first accounting, Beginning Assets should be the taken from the Inventory.  In subsequent accountings, Beginning Assets should be the same number as Assets on Hand at the end of your previous accounting. 

 

            Line 2.:  Show Receipts from all sources.

 

            Line 3: Show Gains on Asset Sales including gains from the sale of real estate, stock (net of commissions), or any other assets.

 

            Line 4: Adjustments mean increases or decreases in the value of assets to keep pace with the market.  This category can be used for other adjustments, too, but see your Commissioner of Accounts first.

   

            Line 5:  Totals Lines 1 though 4.  Line 5 must equal Line 10 when you finish the accounting.

 

            Line 6: Disbursements include expenses of maintaining the estate, such as the bond premium, court costs and commissions, and your Decedent’s debts.

 

            Line 7:  Losses on Asset Sales is just like Gains above, but here you’re reporting losses.

 

            Line 8:  Distributions to Beneficiaries are payments or delivery of assets to those who have inherited from Decedent.  Distributions may be money or property.

 

            Line 9:  If your accounting is not a final accounting, you will be holding assets at the end of the reporting period.  List them here.  You can list them at the carrying value, rather than the market value, but if you do, you must list the market value below as shown.  If you want to adjust the value of your assets annually to keep the accounting abreast of the current market value, you should use Adjustments (Line 4.)

           

For all money or property that leaves the estate, the Commissioner’s office must have a voucher, that is, written proof that the recipient actually received money or property of a certain amount or value.  This can take the form of a cancelled check or a simple written receipt.  If your bank provides only a copy of the front of the check, you should also submit a copy of your monthly bank statement showing the check being negotiated.  You should also submit originals or copies of your monthly investment account statement, your CD’s and any other supporting material requested by the Commissioner.

 

VI. ALTERNATIVE TO ACCOUNTING(S)

 

            You will not need to file an accounting if all of the fiduciaries are also all of the residuary beneficiaries of the estate. Two common examples: if wife is the executor of husband’s estate and she is also his sole residuary beneficiary, she need not file an Accounting. Similarly, if Decedent had two children who are their father’s sole residuary beneficiaries and they both qualified as executors, they need not file an Accounting.  But:  if a surviving spouse is executor and is also the trustee of a living trust that is the residuary beneficiary under husband’s will, she must file an Accounting.  Call the Commissioner of Accounts’ office if you have questions about this.

 

If you are not required to file an Accounting, you must instead file a STATEMENT IN LIEU OF SETTLEMENT OF ACCOUNT FOR DECDENT’S ESTATE.  You certify under oath that all of the estate’s creditors and taxes have been paid, all specific bequests have been paid over and delivered, and the fiduciary(ies) have distributed the balance to themselves as beneficiaries.  If this form cannot be filed within sixteen months of qualification, you should file a statement with the Commissioner in accordance with Virginia Code §26-20.1B.

  

VII. UNKNOWN CREDITORS AND DISPUTED CLAIMS

 

            If you contest a creditor’s claim, you can bring suit to have the matter adjudicated, or you may ask the Commissioner of Accounts for a hearing.  You should not leave any such matter unresolved.

 

           If you fail to pay a creditor, but wind up the estate and file a final accounting, are you personally liable to that creditor?  You should consult counsel on that question.  The procedure to avoid such personal liability is for the Commissioner of Accounts to conduct a  debts and demands hearing and for you then to have the Circuit Court enter an Order of Distribution setting out how the estate is to be distributed.

 

 

VIII. FEES FOR EXECUTORS AND ADMINISTRATORS

 

            As this is written (Spring 2004), the Commissioners of Accounts for the Twenty-Sixth Judicial Circuit have set out a fee schedule for executors and administrators.  This is expected to be supplanted by a state-wide schedule promulgated by the Judicial Council of the Supreme Court of Virginia.  Call the Commissioner of Accounts office to ascertain your commissions.

 

 

IX. PENALTIES FOR NONCOMPLANCE

 

            The Supreme Court of Virginia, through the Judicial Council, sets penalties for non-compliance with deadlines and work quality.  The Judicial Council provides for the assessment of a fine if you receive a “late letter”.  If you do not respond to your Commissioner’s “late letters,” you should expect to be summoned to his office by a sheriff.  If you do not comply with that summons, you will be summoned to Circuit Court and be subject to the penalties imposed by the judge.  Additionally, you may be denied your commissions.  Penalties, fees and fines must be paid out of your own funds.

 

X. FORMS

            (Forms are available on this website in Adobe .pdf format.)


Copyright © 2005 City of Danville, VA, Commissioner of Accounts, All Rights Reserved.