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Estate Administration Account

Estate fiduciaries are required to file their first accounts covering the first year of administration within sixteen months after qualification.1 Thereafter, all such accounts are due annually four months after the anniversary date of the fiduciary’s qualification, covering a one-year period.2  The commissioner must approve the filing of accounts covering more than 12 months, which may be subject to additional fees.  If an interested party has requested copies of estate filings, the fiduciary must show that such copies were provided or the commissioner will not approve the account.3

Settlement of a fiduciary’s account is a continuous narrative. The beginning balance of the first account must be the reported value of the probate estate on parts 1 and 3 of the inventory. Similarly, the value of the ending assets in each account must then appear as the value of the beginning assets in the next account.  Fiduciaries should pay close attention to the addition and subtraction of the columns in the account.  Math errors will require the filing of an amended account and an additional filing fee. 

A commissioner’s view of the assets of an estate is static. If the IBM stock which the decedent owned at his death was worth $10.00 per share on the day he died, that stock will be worth $10.00 per share when it is distributed from the estate four years after the decedent’s death. Unrealized gain or loss remains unreported. Market fluctuations, while relevant for computing fiduciary fees and filing fees, are irrelevant to account reporting. There is, in effect, an estate basis similar to a tax basis, which is the foundation of estate accounting.  Assets are reported at carrying value (inventory value) in the account until the asset is sold.  Do not report market fluctuations.

The account audit focuses upon reasonable proof of receipts, disbursements, and distributions. Generally, this proof consists of appropriate vouchers upon which the commissioner can rely. In the case of receipts, bank or brokerage account statements will generally suffice, although the commissioner may require exhibition of 1099s or K-1s as appropriate. Transactions involving personalty or closely-held securities will usually require a bill of sale or other acceptable documentation to demonstrate value. The commissioner requires a copy of the executed HUD-1 for all real estate transactions.

Corporate fiduciaries are permitted to file an affidavit of payment to account for debts, taxes and expenses without providing vouchers.4  This provision does not relieve corporate fiduciaries of the responsibility to provide receipts or vouchers for distributions to beneficiaries, although automated electronic distributions to beneficiaries do not require vouchers beyond the bank statement of account if the beneficiary has previously consented in writing to such distributions.5

For disbursements, commissioners traditionally required exhibition of original cancelled checks. As modern check imaging has replaced physical return of actual checks, the General Assembly has accommodated this technology by permitting copies of bank statements which include one side of cancelled checks to suffice.6  Where the commissioner remains unsatisfied, he may still require a proper voucher, but he may not require the actual cancelled check.7 Receipts from payees, such as funeral homes, also suffice as vouchers. Funeral expenses continue to have special significance to most commissioners in light of prior statutory requirements to exhibit a paid receipt for the funeral. Therefore, most commissioners will require evidence of payment in full of this cost.

Increasingly, fiduciaries are using money market accounts at brokerage houses as estate checking accounts. These accounts usually do not return checks and do not provide images of payments that are made. The only record of payment is a notation upon the account statement, noting the amount and, in most cases, the payee of the check. The reliability of these payment records is difficult to ascertain. Unlike bank accounts, withdrawal from the account is generally not based upon negotiation of the check and it is not generally indicative of receipt of the payment by the named payee. Electronic banking payments have the same characteristics. These payments are not fully in accord with the provisions of §64.2-1311.E of the Virginia Code8 and the acceptance thereof as “proper vouchers” is in the discretion of the commissioner.

In Fairfax, the commissioner will generally accept evidence of payment of routine expenses, such as utility bills, mortgage payments, or other regular disbursements, shown on brokerage account statements or as electronic banking withdrawals. The commissioner will usually require additional evidence of payments of unusual or large expenses, such as funeral bills, legal fees, or taxes. The commissioner will always require additional evidence of receipt of distributions to beneficiaries.

For distributions, the commissioner requires a bank statement including an image of the distribution check or an originally signed receipt from the beneficiary.  If a decedent’s will includes specific monetary bequests and the funds are distributed more than one year after the decedent’s death, the fiduciary must also pay interest on such bequests.9

If the will of a widow or widower establishes a testamentary trust for the benefit of the deceased spouse and payable to the children upon the death of the spouse, a distribution to that testamentary trust serves only as a conduit for further disbursement of funds. In such circumstances, it is not the policy of the commissioner’s office to require needless acts which provide no substantive benefit to the estate or the heirs. If the executor and the trustee concur that the trust would be terminated immediately if funded, the commissioner will not require the qualification of the trustee and the funding of the trust solely for purposes of form. Upon the written requests of the executor and the trustee, the commissioner will waive the funding of the trust and the qualification of the trustee.

If the commissioner determines that he cannot approve the fiduciary’s account unless it is amended, an additional filing fee of at least $30 will be charged.  In his discretion, the commissioner may charge an additional fee equal to the full fee for the amended account as if filed as an original account.


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1  Va. Code Ann. § 64.2-1304.A.

2  Va. Code Ann. § 64.2-1304.B.

3  Va. Code Ann. § 64.2-1303.B.

4  Va. Code Ann. § 64.2-1311.D.

5  Va. Code Ann. § 64.2-1311.B.

6  Va. Code Ann. § 64.2-1311.E.

7  Id.

8  There is no image of the item and the record is not evidence of payment, merely evidence of withdrawal.

9  Va. Code Ann. § 64.2-425.





 



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