This is Part 5 of a my series on the Virginia Probate Administration providing the basics of inventory and accountings the personal representative must undertake. You can read previous posts on this series including Part I: introduction to probate (here), Part II: qualifying to be the personal representative (here), Part III: the duties and liabilities of the personal representative (here) and Part IV: the initial steps (here).
The basic premise behind the need for an inventory and accountings of a decedent’s estate is determine the assets and liabilities of the decedent and figure out what property gets disbursed out to beneficiaries and what claims are paid to any creditors. It boils down to balancing a check book and the personal representative is the person in charge of that balancing and submitting that information to the commissioner of accounts for approval.
What is the commissioner of accounts? Instead of bogging the court down with the numerous auditing done to a decedent’s financial estate, Virginia has established a quasi-independent judicial review system. Commissioners are court appointed by the various circuit courts to oversee the probate process. The commissioners review submitted inventories, audit filed accountings to determine accuracy, determine potential fiduciary bonds, conduct hearings on creditor claims, determine reasonable compensation for the personal representative, and resolve any other minor issues that might appear during the administration. In addition to reviewing the inventories and accountings, commissioners also approve them or can reject them if not acceptable. Thus, it always pay to be on the good side of a commissioner because they can be very helpful when a small discrepancy appears in an accounting.
Within Four Months after Qualification:
Within the same time frame, a personal representative files an affidavit stating notice has been given to all interested persons, the personal representative must also file an inventory with the commissioner of accounts. The inventory is a summation of all the probate assets the decedent owned at the time of death that must be accounted for during distribution and the settling of creditor’s claims.
The market value at the time of decedent’s death for each item listed in the inventory must be stated. The market value would be what a reasonable willing buyer would pay to a reasonable willing seller for the item. The value of any real estate can be listed based on the local property tax assessment. Many times the property does not need to be appraised, but, if there is any dispute on the value or estate tax is due (when an estate tax is in place) then an independent appraisal is necessary.
The inventory must include:
- all personal property, tangible and intangible, at the time of decedent’s death and under control of the personal representative,
- multi-party accounts in any financial institution, and
- all real estate over which the personal representative has the power of sale, under a will, and any other real estate that is an asset of the decedent’s estate, whether or not situated in Virginia.
While the inventory should be as exact as possible, an amended inventory can be filed if additional pieces of property have been discovered after the filing of the inventory with the commissioner. Sometimes, a commissioner will allow for adjustments in the accountings due to newly discovered property instead of filing an amended inventory.
Within Sixteen (16) Months of Qualification
Within sixteen months of qualification, the personal representative must file the first annual accounting with the commissioner of accounts. The accounting must state all property and money the personal representative has been collected, been charged with or disbursed from the twelve months from qualification. In reality, the personal representative is given a four month period to prepare and file the first accounting for the 12 months prior. Though a majority of decedent’s estate are closed with the first filed accounting; additional annual accountings must be filed until the estate is closed.
This is a deadline date and a personal representative can file an accounting earlier if the estate has been fully settled. However, the commissioner of accounts will generally not accept an accounting filed less than six months after decedent’s death for creditor’s notice purposes.
An accounting is essentially a balance sheet that summarizes the beginning assets derived from the initial inventory and balances the summary to account for receipts, gains on sales and adjustments against distributions for debts and administration expenses, disbursements to beneficiaries and heirs, losses on sales and ending assets. Every figure must be supported by documentation listing each transactions, asset or adjustment. For example, a distribution to a beneficiary can be supported by a cancel check or the value of an asset with the bank or brokerage statement.
The accounting must include a certificate, signed by all the personal representatives, that the accounting is a true and accurate statement of estate’s assets. If it is a final accounting, then the certificate must also include a statement that all taxes have been paid. If the accounting does not properly account for the assets, the personal representative can be sued and be liable for value of the loss, so proper documentation and steps are a must for any personal representative.
My goal was to wrap this series up but I still have several more posts on the topic but I’ll get through it sooner rather than later.