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Estate Administration Inventory

In all estates, a fiduciary’s relationship with the commissioner begins with the filing of an inventory, due four months after qualification with the circuit court.1  The inventory provides a record of all assets under the fiduciary’s supervision and control. As all future actions are based upon this inventory, it is “of vital importance. It is the starting point and the basis upon which the accounting rests.”2  Correct addition and subtraction of the columns in the inventory will accelerate its review and approval.

Inventory assets should be valued at the fair market value as of the date of the decedent’s death, not the date the inventory was prepared.  Estimated values are acceptable in the case of ordinary household goods. The fiduciary should obtain appraisals of personal property which has unusual value or is a collectible. Real estate may be listed at the assessed value for local real estate taxes or the fiduciary may submit an appraisal of its fair market value. Assets are listed at the gross value of the asset, without reduction for any debt, mortgage or lien against the property. The valuation of assets for inventory purposes has tax implications. The fiduciary may wish to consult with a tax advisor before filing the inventory.

The inventory form states that “[t]he Commissioner of Accounts has not independently verified the value of the items on the inventory or the fact that they are the only assets of the estate.”3 From the perspective of the commissioner, the inventory is presumed to be correct. There is controversy among the commissioners of account whether a commissioner has authority to conduct a hearing to determine objections to an inventory.4 The office of the Fairfax commissioner has consistently taken the position that objections to an inventory are proper matters to be heard pursuant to Virginia Code § 64.2-1209,5 and the commissioner’s approval of the inventory does not preclude an objection to its contents in the context of a hearing about the account.  As the Code section refers specifically to an account, it is generally the practice of the Fairfax commissioner to at least require the filing of an account before convening a hearing pursuant to Virginia Code § 64.2-1209 concerning objections to an inventory. This gives the fiduciary an opportunity to make adjustments to the assets stated in the inventory in the account prior to the hearing.  Thus, it may be more than a year after qualification before the commissioner may hold a hearing on any objections to an inventory.

Under § 64.2-1300.E of the Virginia Code, in the case of after-discovered assets, a fiduciary has the option of filing an amended inventory or, with the permission of the commissioner, showing the after-discovered asset as an adjustment on the next regular account. In Fairfax, the commissioner routinely gives permission to show after-discovered assets on the next regular account, eliminating the need for most amended inventories.  The commissioner does require an amended inventory if the after-discovered asset is a joint bank account, as this asset is not reported as a part of the probate estate.

Virginia Code § 64.2-508 requires a fiduciary to give notice of the estate to all interested parties within thirty days of qualification and to file an affidavit of such notice within four months of qualification. The notice advises interested parties of the filing schedule for the estate and notifies them of their right to obtain copies of the filings by requesting the same from the fiduciary. The commissioner is prohibited from approving “any settlement” until the fiduciary files the required affidavit. The commissioner has responsibility to enforce the filing of the affidavit. As the statute specifically refers to settlement of an account, the Manual for Commissioners of Account states that “the Commissioner should approve the inventory regardless of whether the affidavit has been filed.”6  In Fairfax, the commissioner has declined to follow this interpretation of the Virginia Code.  In the opinion of the Fairfax commissioner, the required notice is the primary legal basis for an heir or other party to become aware of a pending estate in which that person might have an interest.  If the notice is not timely and properly given, it may be ineffective if the assets have been disbursed prior to the filing of the first account. Therefore, in Fairfax, the commissioner requires the filing of a proper affidavit of notice as a part of the approval of the initial inventory.

The inventory form requires reporting only certain assets that the decedent owned jointly with another.  The interests of the decedent in “multiple party accounts and certificates of deposit in banks and credit unions” are reported in part 2 of the inventory.7  This includes jointly-held bank accounts or bank accounts which contain a “payment on death” provision (POD accounts).  In other words, part 2 includes only the decedent’s interest in bank accounts that pass to another by virtue of a right of survivorship. The inventory does not include jointly-held brokerage accounts, mutual funds, or real estate.

Secondly, that portion of such accounts includible in the inventory is only the decedent’s interest in the accounts. Generally the valuation should be limited to the proportionate share of the decedent in any such accounts at financial institutions. These amounts are reported in the inventory as such joint accounts may be subject to claims of the decedent’s creditors.8  Fiduciaries should also note that divorce extinguishes rights of survivorship in multi-party accounts and renders them tenancies in common.9  The decedent’s interest in multi-party accounts that are subject to this statute should be reported in part 1 as assets of the decedent.

Fiduciaries also frequently make erroneous reports of a decedent’s real estate holdings. The inventory includes real estate which the decedent owned, or in which he had a partial interest; however, it does not include in any form the decedent’s jointly-held real estate which passes pursuant to a retained right of survivorship. Fiduciaries should take care to classify real-estate related assets correctly. Interests in a real-estate partnership or a real-estate limited liability company are personal property, reportable in part 1 of the inventory. Interests in condominium property,10 cooperatives,11 or time-share interests12 are real estate interests,13 reportable in parts 3, 4 and 5 of the inventory.

If the fiduciary has the power to sell real estate, the fair market value of the decedent’s Virginia real estate is included in part 3, including real estate that has been specifically devised.14  The power to sell real estate may be stated in the will or may be incorporated by reference.  Virginia Code § 64.2-105 provides general fiduciary powers that may be incorporated in a will, including the power to sell real estate.  If the fiduciary has the power to sell real estate, this increases the probate estate and the amount of the requisite bond.  If there is no will, the decedent’s interest in Virginia real property is listed in Part 4 unless the fiduciary obtains a court order granting power of sale.


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1  Va. Code Ann. § 64.2-1300.A.

2  Lamb, Virginia Probate Practice § 16 (1957).

3  Circuit Court Form CC-1670.

4  See Manual for Commissioner of Accounts § 5.801.

5  Virginia Code § 64.2-1209 provides “Any interested person, or the next friend of an interested person, may, before the commissioner of accounts, insist upon or object to anything which could be insisted upon or objected to by such interested person if the commissioner of accounts were acting under an order of a circuit court for the settlement of a fiduciary's accounts made in a suit to which such interested person was a party.”

6  Id. at §5.105.

7  Circuit Court Form CC-1670.

8  See Va. Code Ann. § 6.1-125.8.

9  Va. Code Ann. § 6.1-125.4.

10  Va. Code Ann. § 55-79.41.

11  Va. Code Ann. § 55-428.A.

12  Va. Code Ann. § 55-363.

13  See generally Manual for Commissioners of Account § 5.202. Commissioners around Virginia generally subscribe to the tenet that if an interest is transferred by deed, it is real estate.

14  Manual for Commissioners of Account § 5.202.





 



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