This is my sixth posting on my series of the Virginia Probate Administration concerning exemptions and creditor claims on the estate. 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), Part IV: the initial steps (here), and Part V: inventory and accountings (here).
Exemption Claims must be made within 1 year of decedent’s death
Probate is the process of collecting all the assets of the decedent and then distributing the property according to the decedent’s will or under intestate statutes and settling any creditor’s claims. Virginia probate code provides three separate exemptions to jump in front of the beneficiaries and creditors to receive estate assets. The exemptions are used as a way to satisfy family support obligations of the decedent. Those exemptions are the family allowance, exempt property and household allowance. The family allowance and exempt property allowance are in addition to any benefit or share passing to the surviving spouse or minor children by the will of the decedent, by intestate succession, or by way of elective share.
Virginia, like most other states, believes the surviving spouse and minor children, whom the decedent was obligated to support, are entitled to a reasonable allowance in money from the estate for their support during administration of the estate. The family allowance may not exceed $18,000 without a petition to the court and can be paid in a lump sum or in monthly payments of not more than $1500. The family allowance is paid to the surviving spouse to be used to care for the surviving spouse and any minor children. If the surviving spouse is deceased, the allowance can be given to the caretaker of any minor children. If there are no minor children, the allowance can go directly to support the surviving spouse. The claim for family allowance must be made within 1 year of the death of the decedent and monthly payments may not last more than one year. The family allowance has priority of claim over all other claims against the estate.
The second exemption is the exempt property allowance and it has priority over all other claims against the estate except the family allowance. The surviving spouse of a decedent domiciled in Virginia is entitled to receive from the estate up to $15,000 of the value in excess of any security interests (liens for loans, etc.) in household furniture, automobiles, furnishings, appliances and personal effects. If the selected property does not use up the exempt property allowance then the spouse can select other assets of the estate to the extent necessary to make up the difference. If the decedent is not survived by a spouse, any minor children would step-up in place of the spouse and take equal shares of the exempt property allowance.
The third exemption is the household allowance. It has priority over all other claims against the estate except the family allowance and exempt property allowance. A surviving spouse of a decedent who was domiciled in Virginia is entitled to a homestead allowance of $15,000 and minor children would step-up if the decedent was not survived by a spouse. Unlike the family allowance and exempt property allowance, the household allowance is in lieu of any share passing to the surviving spouse or minor children by will or intestate share except if that amount is less than $15,000. In short, this ensures that a decedent does not disinherit his spouse or minor children. Also, if the surviving spouse takes an elective share, the surviving spouse is not entitled to the household allowance. I will get into the elective share in a future posting because it is very complex.
Probate is the legal means of making creditors aware of the death of the decedent and the creditors need to file their claims for debts owed to them by the decedent. Creditors file claims with the Commissioner of Accounts. The personal representative can then respond by stating if the claims are unenforceable, invalid or should be paid. Generally, the personal representative has a duty to pay debts owed by the decedent out of the estate’s assets prior to paying out anything to the beneficiaries.
Generally, if the debt is not in dispute, the claims are quickly paid if the assets in the estate are large enough to meet those obligations. If there is a dispute about the claim that can not be resolved by the creditor or personal representative, a hearing is held by the Commissioner of Accounts. This hearing is a called a debts and demands hearing and can include demands by not only creditors but also by any legatee or distributee of a decedent. An accounting is generally needed prior to any debts and demands hearing is held. Ten (10) days prior to the hearing, the Commissioner must place notice of the hearing in a general circulation newspaper in the area where the personal representative qualified and also place a notice on the courthouse door.
The personal representative is also required to give notice, via regular, certified or registered mail to all claimants that the personal representative disputes their claim. The notice must inform the claimant of his rights, including the rights:
- to attend and present the case on his claim,
- to obtain another date if the Commissioner determines that the initial date is inappropriate,
- to the fact that he will be bound by any adverse ruling, and
- to file exceptions to the Commissioner’s report if the creditor disagrees with the Commissioner’s determination.
At the hearing the personal representative must provide evidence of the mailing of the required notice to the hearings. If the issue is one the Commissioner can not resolve, the Commissioner can direct the personal representative to institute the appropriate legal proceedings.
Within sixty days of the debts and demands hearing, the Commissioner is required to file a report with the court stating the debts or demands as appear to the Commissioner to have been sufficiently proved, stating separately those of each class. The statement of debts is important in an insolvent estate because of priority that establishes the order claims are paid in an insolvent estate. If a party disputes the report, that party has fifteen (15) days after the filing of the report to file a list of exceptions to the Commissioner’s report stating the errors made.
I was hoping to finish this series up with this post and address some other interesting topics. However, there is a ton of additional information to cover and, I guess there will be at least two more post.