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Fiduciaries

Yes, all fiduciaries in Virginia handling the administration of an estate are required to file accountings unless filing requirements were waived at the time of your qualification. Estates valued at not more than $25,000.00 at the time of probate will not have to file an inventory or accounting if specifically waived by the Clerk’s office and noted on your qualification certificate. 

However, please note that if, after probate, you determine that there are assets in the estate valued at more than $25,000.00, it is your lawful obligation to report this fact to the Commissioner of Accounts, who will then require you to file an inventory and accounting for the estate.

The answer is generally yes unless you are one of the fiduciaries of the estate (executor or administrator) and you are the sole residuary beneficiary of the estate under the will or by intestacy. For example, if the husband dies and leaves all of his estate to his wife under his will and the wife is the executor, the wife is not required to file the long form accounting, Form CC-1680, but is entitled to file a Statement in Lieu of a Final Accounting, Form CC-1681, along with a tax affidavit to close out the estate. This form may be filed six (6) months from the date of qualification. Likewise, if a husband dies without a will, leaves two children (no spouse), and the two children qualify as co-administrators, they will be able to file a Statement In Lieu of Settlement of Account and a Tax Certificate rather than the long form accounting.

Otherwise, the executor or administrator is required to file a balanced account on Form CC-1680, in triplicate (with attached sheets itemizing all line items on that form) and present invoices, receipts, cancelled checks, and appropriate documentation for all disbursements and distributions from the estate.

By statute, if the residuary beneficiary of an estate is a trust, even if the trustee of the trust is the beneficiary of the trust and is also the executor of the estate, no Statement in Lieu of the Final Accounting may be filed, and the long form account, Form CC-1680, shall be filed. Section 64.2-1314, Code of Virginia (1950), as amended.

The answer is generally yes. The Virginia Supreme Court and the General Assembly have indicated that the appropriate forms for filing by each fiduciary shall be provided at the time of qualification and that inventory and accountings shall be made on the form provided, on a computer-generated facsimile thereof, or in any other clear format.  The phrase “in any other clear format” is ambiguous and often leads to trouble. It is suggested in all cases that you use the approved form; otherwise, you run the risk of having your accounting returned to you to be redone on the appropriate forms.

No. The Commissioner of Accounts’ office audits inventories and accounts and does not prepare or balance accounts. It is your responsibility as personal representative to prepare a proper inventory and accounts and to file them in a timely manner.

You may engage the services of an estate administration attorney or a certified public accountant to prepare your accounting.  If you do so, please note that the cost of those professionals will be deducted from the commission allowable to you, in most cases.

Yes, you may and are encouraged to employ qualified estate administration lawyers or certified public accounts as appropriate to properly administer the estate and meet your filing obligations and deadlines. However, you may not employ professionals to do the work that you have qualified to perform and still expect to be fully compensated as a fiduciary.

Absolutely not. You are prohibited from using estate money for any purpose or dealing with estate assets in any manner that personally benefits you. You shall not borrow money from the estate; you should not loan money from the estate and should not buy assets from the estate unless you have prior written, notarized approval of all beneficiaries and approval from the Commissioner of Accounts.

Absolutely not. You shall not co-mingle estate assets with your personal assets. Estate assets shall be completely segregated and shall not be co-mingled with your funds, assets, or anyone else’s funds or assets. Your first action as a qualified fiduciary should be to open an estate account under a new federal employer identification number obtained for the estate. You may obtain that number online at www.irs.gov. It costs nothing. Do not use a website that charges a fee to obtain that number.

Distributions to minors (any beneficiary under the age of 18) shall be made as follows:

1. If the total amount to be paid to the minor does not exceed $25,000.00, payment may be made under the Uniform Transfers to Minors Act (if considered in the best interest of the minor by the personal representative and is not inconsistent with or otherwise prohibited by the will). Uniform Transfers to Minors Act Section 64.2-1900, Chapter 6, Code of Virginia (1950), as amended. A receipt specified under that act will be accepted by the Commissioner of Accounts as a valid distribution to a minor. Section 64.2-1908(b), Code of Virginia (1950), as amended.
2. If the inheritance or bequest to a minor exceeds $25,000.00, it must be paid:
   1. Either pursuant to a Court order directing the method of payment;
   2. To a duly qualified guardian of the property of a minor. This is not the legal guardian. This is a guardian appointed in the Clerk’s office who has authority to act on behalf of the minor in regards to his or her property; or,
   3. To a custodian pursuant to the Uniform Transfers to Minors Act if allowed by the will. Section 64.2-105, Code of Virginia (1950), as amended, allows such distributions if it is incorporated by reference in the will.

NOTE: The Commissioner requires an affidavit to be filed for a transfer under the Uniform Transfers to Minors Act (see form under Section 64.2-1908 B., Code of Virginia), PLUS evidence that the custodial bank account has been established with the distribution.

Only if the will specifically allows for distribution to minors under the Uniform Transfers to Minors Act or the will incorporates the fiduciary powers of Section 64.2-105, Code of Virginia. Otherwise, if the total to be inherited by the minor exceeds $25,000.00, you must have Court direction as to the payment or payment to a Court-qualified guardian of the property of the minor. You cannot avoid the $25,000 limitation by making two distributions under $25,000.00, which, combined, exceed $25,000.00.

Prepare your proposed final accounting showing the payment of all remaining debts and obligations, and proposed distributions to beneficiaries. Prepay the CPA or other tax preparer for necessary filings. Fax the proposed accounting to the Commissioner’s office (804-273-0840) to obtain a quote on the Commissioner’s fees and the Clerk of Court fees. Upon receiving the Commissioner’s fees and paying any additional expenses to be incurred in administration, insert those as final costs and recalculate the final distributions to the beneficiaries in accordance with the will or intestate laws, and then make the distributions resulting in zero (0) assets. Upon receiving receipts from the beneficiaries, you will then submit your final accounting with the check to the Commissioner. The Commissioner’s office does not pre-audit or pre-approve accounts, so be aware that the quoting of the Commissioner’s final fee based on the draft final account is not a pre-approval of the account.

If the decedent died intestate (without a will), the laws of the State of Virginia determine the rightful heirs at law to the estate of the decedent. Sections 64.2-200, and following, Code of Virginia (1950), as amended. You should be very careful in making distributions in intestate estates unless you are absolutely satisfied that you are correct in the distribution. You are personally liable for improper distributions. Consult with an estate administration attorney before making distributions if you have any questions.

Note: The laws of intestate succession can be very complicated. Many laymen, as well as lawyers, make mistakes in the distribution of estates where there is no will. Please seek competent legal advice in these situations. The cost of that legal advice is generally chargeable to the estate without deduction against the fiduciary’s commission.

Generally, a will provides a condition of survivorship in order to inherit. If that requirement exists, the gift to that beneficiary generally lapses. For example, if the will says “I give $5000 to John Jones, if he survives me” and he has predeceased the decedent, the bequest lapses. If the will says “I give $5,000 to John Jones” and John has pre-deceased the decedent and is not related by blood to the decedent, the monetary bequest lapses. If the beneficiary and decedent were descended from common grandparents, the gift, however, may pass to the children of the deceased beneficiary under the Virginia Anti-Lapse Statute. Section 64.2-418, Code of Virginia (1950), as amended. If the will says “I give to John Jones, or his descendants, $5,000”, and he has predeceased the decedent, his descendants inherit the bequest. The interpretation of the will and this statute may require advice from an estate administration attorney. If a beneficiary or heir at law has predeceased the decedent, consult with an estate attorney if you have any doubts regarding distribution.

In intestacy (no will), the prior death of an heir at law may change the pattern and percentages of distributions, so the advice of counsel is strongly recommended.

If a beneficiary is alive at the death of the decedent but dies prior to distribution, the beneficiary’s estate is the proper payee of any gift or devise made under a will or as part of an intestate distribution. 

However, be aware that many wills have a time period during which a beneficiary must survive the decedent. In the absence of a period of survivorship set forth in the will, Virginia law provides a requirement for survivorship by 120 hours, and if the beneficiary dies within 120 hours of the decedent, then the gift lapses. See Sections 64.2-2201 and 2202, Code of Virginia. If the bequest does not lapse, distributions should be made to the administrator or executor of the estate of the deceased beneficiary who dies after the decedent. Generally, someone must qualify as the estate of the deceased beneficiary and must give you a receipt on behalf of the estate of the deceased beneficiary for all property and/or money paid to the beneficiary’s estate.

Disbursements are for debts of the decedent or expenses in the administration of the estate. Each disbursement shall be accompanied by a bill or paid receipt, a copy of both sides of a cancelled check, or a photocopy of the check which has been included with the monthly bank statement, or a signed receipt, properly notarized. In assembling your proof of disbursements, please arrange them in the order in which you have shown them on the listing for line 6 on the account summary. Attach the bill and the cancelled check or other proof of payment for each item so that the auditor may easily follow each entry that you make and be able to approve each entry.

Distributions are payments made according to the will to beneficiaries or to the heirs at law in intestate estates. These payments must be proven by a copy of the cancelled check (front and back), or a receipt signed by the beneficiary (if an adult) acknowledging receipt of the specific amount or item, which statement shall be notarized. Please note that copies of cashier’s checks, bank checks, or official bank checks are not proper receipts and will not be accepted by the Commissioner’s office unless you can obtain a copy of the front and back from the bank. With online banking, you can generally obtain copies of the front and back of cancelled checks.

You may make a distribution at any time you have determined that the estate is solvent and able to pay all debts and obligations. Be careful. Once money has left the estate, it is a rare occasion that it is ever returned to pay a debt arising after the distribution.

If the estate is solvent, you must make distribution and payment of any pecuniary legacy (a sum of money left to a beneficiary) within twelve (12) months from the decedent’s date of death, otherwise, the estate is chargeable with interest at the legal rate which is payable to the beneficiary commencing twelve (12) months from the date of death. Section 64.2-425, Code of Virginia. For example, if $10,000.00 is left to John Doe and you qualify but don’t make distribution to John until eighteen (18) months from the date of the decedent’s death, the estate or you personally, owe John interest on the $10,000.00 at the legal rate of interest (currently 6%) for the six-month period after the expiration of one year from the date of the decedent’s death.

Property given by a decedent during his lifetime to a person named as beneficiary in his will is not treated as satisfaction of that bequest unless:

1. The will specifically provides that lifetime gifts shall be a deduction against any gift made in the will; or
2. The decedent has declared in a writing made at the time the gift was given that it is to be deducted from the bequest or is in satisfaction of any bequest under the will; or
3. The beneficiary acknowledges in writing that the gift is in satisfaction of that to which he was entitled under the will. Section 64.2-417, Code of Virginia (1950), as amended.

In the very simple estates, you probably will not need the advice of an attorney.  However, there are many intricacies in the law that present stumbling blocks for executors and administrators. If there is any doubt as to whether what you are doing is proper, you should consult with an attorney, have that attorney review your actions, and approve those actions before they are completed. Reasonable costs associated with consultation on legal issues involved in the administration of the estate are generally approved as proper disbursements from the estate without deduction from the commission due to the executor or administrator. If, however, you hire an attorney to perform your services as a fiduciary, you cannot pay the attorney’s bill from the estate and also expect to be fully compensated according to the Guidelines for Fiduciary Compensation. See the following question and answer.

If the estate involves the filing of taxes, as almost all estates do, the services of a qualified CPA or enrolled agent will be necessary. You are required to file the decedent’s personal final tax return for the year in which the decedent died and any unfiled years in which a return was due. You are required to file fiduciary income tax returns for each year that you have the estate open for administration and have income to the estate.  The filing of a fiduciary income tax return may be advisable to pass through to the beneficiaries losses of the estate, such as commission paid to you as the fiduciary, qualification costs, and any other expenses of administration.

Estate taxes are generally not an issue; however, under current federal estate tax law, if the estate exceeds $10,000,000, an estate tax return is to be filed and estate taxes paid.  If you have an estate that approaches the federal exemption from taxation, you should consult with a qualified tax attorney or CPA to determine whether or not filing is appropriate, and if so, what liability there is to the estate. BE CAREFUL: ASSETS PASSING OUTSIDE OF PROBATE MAY NONETHELESS BE PART OF THE TAXABLE ESTATE (for example, life insurance and survivorship assets).

Note: In general, the current exemption from estate taxation is in excess of $10,000,000. This is modified from year to year and is subject to other conditions. You should consult with a CPA or an estate attorney on any estate for a decedent where there are substantial assets to determine if an estate tax return should be filed. The reasonable cost of engaging a CPA or tax attorney is an allowable expense to the estate for which no deduction will be made against the commission payable to the administrator or executor.

If you are lost in preparing the accounting, cannot get the accounting to balance properly, or feel you are limited in the ability to prepare the accounting, you should engage an estate administration attorney or CPA to prepare that accounting. Your commission, in all likelihood, will be reduced by the cost paid to the professional you engage to perform that service.

Be aware that without approval of the Commissioner, the bills of an attorney hired by you to complete your administrative duties cannot exceed the “Guidelines for Fiduciary Compensation” and be payable from the estate. In such a case, you may be personally liable for the excess fees charged above the “Guidelines”.