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Estate Administration Real Estate

Under Virginia law, real and personal property are subject to different rules of administration. Title to real property vests in the devisee or heir immediately upon the death of the decedent; title to personal property vests in the personal representative for distribution to heirs or, if necessary, to pay off debt.1 

The fiduciary may sell the decedent’s real property only if the testator or the Court grants the fiduciary a power of sale over the real property.2  Note that the fiduciary is not permitted compensation upon the value of the real estate unless the fiduciary exercises the power of sale.  Testators frequently incorporate the fiduciary powers set forth in Virginia Code § 64.2-105, which includes the power of sale.  Virginia Code § 64.2-105.B.3 expressly empowers a fiduciary “To sell, assign, exchange, transfer and convey, or otherwise dispose of, any or all of the investments and property, real, personal or mixed, that are included in, or may at any time become part of the trust or estate upon such terms and conditions as the fiduciary, in his absolute discretion, deems advisable, at either public or private sale, either for cash or deferred payments or other consideration, as the fiduciary determines.”

The power of sale may or may not be coupled with an interest in the real property.3  Unless the power of sale is coupled with an interest in the real property, the real property passes to the devisees under the will or the heirs at law, subject only to divestiture should the fiduciary exercise the power of sale.4  The devisees are entitled to use the property as their own until the fiduciary exercises the power of sale.5  In contrast, a power of sale coupled with an interest is in effect a devise to the fiduciary with express direction to sell the real estate.6

A fiduciary who qualifies before the court accepts the powers and duties set forth in the will.7  While the fiduciary may elect not to use a discretionary power to sell real estate, absent an order of the court, the fiduciary may not divest himself of that power. How then should a fiduciary report in his accounts real estate over which he has the power of sale, but which has passed by operation of law to the heirs or devisees?

In Fairfax, if the fiduciary has no intention and no need to sell the real estate of the decedent, notwithstanding the power of sale granted in the will, the commissioner will permit the removal of the real estate from the probate estate as an adjustment in the first account, provided the fiduciary clearly declares his intent not to sell the property.

This is the general rule among Virginia commissioners. As one commissioner put it to his peers: “[I]n most cases the fiduciary has no real connection with the real estate, and it never comes under his authority, supervision, or control, and it is never ‘distributed’ by him. Where it is never under his control to administer or distribute, I do not require him to account for it, and I do not allow him commission on it (subject to special circumstances), and I do not charge a COA fee on it.”

Absent a will provision to the contrary, a present intention not to exercise the power does not prevent the fiduciary from the actual exercise of the power at a later date. Pursuant to § 64.2-105, the fiduciary remains empowered to sell the real estate.

It is the duty of the personal representative to sell so much of the probate assets as the estate may require.  When the fiduciary is granted a power of sale coupled with an interest or where the testator grants the fiduciary a power of sale that the fiduciary is required to exercise, a fiduciary must sell the real estate, and make the proceeds available to satisfy creditors.8  When the fiduciary is granted a discretionary power of sale and holds no interest in the real property, the Fairfax commissioner has determined that the fiduciary cannot be compelled to exercise the power of sale to satisfy general creditors.9

Virginia Code § 64.2-531 now provides that an asset that is left to a specific person is subject to existing debts that encumber that asset, unless the will clearly and explicitly states otherwise.10

When title to the real estate passes to the devisees or heirs at law, those persons become responsible for that real estate’s debts and expenses unless and until the fiduciary exercises the power of sale.  If the estate pays such expenses, it has the potential effect to shift the beneficial interests in the estate from those inheriting the personal property to those inheriting the real property, which is improper.11 The Fairfax commissioner will generally permit the estate to pay real estate expenses where the beneficial interests in the estate’s personal property and real property are the same.  


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1  Broaddus v. Broaddus, 144 Va. 727, 130 S.E. 794 (1925). See also Estate of Hackler v. Hackler, 44 Va. App. 51, 602 S.E.2d 426 (2004); In re Estate of Trent, 58 Va. Cir. 83 (City of Richmond, 2001).

2  Neblett v. Smith, 142 Va. 840, at 855, 128 S.E. 247, 252 (1925); Broaddus v. Broaddus, 144 Va. 727, 742-43, 130 S.E. 794,799 (1925).

3  See Stark v. City of Norfolk, 183 Va. 282, 288, 32 S.E.2d 59, 61 (1944); Coles’ Heirs v. Jamerson, 112 Va. 311, 316-17, 71 S.E. 618, 619-20 (1911); In re Estate of Woods, 71 Va. Cir. 224, 226 (Arlington County, 2006).

4  Id.

5  Id.

6  Id.

7  Estate and Trust Administration in Virginia § 3.202 (2nd ed. 2003).

8  See Fairfax Commissioner’s report in Estate of John Theodore Finley, Fiduciary No. FI-2011-0000346, confirmed April 1, 2013.

9  Id.

10  This is not the case if a conservator or attorney in fact creates the encumbrance while the testator is incapacitated. Va. Code Ann. § 64.2-531.B.

11  See French v. Vradenburg’s Ex’rs, 105 Va. 16, 52 S.E. 695 (1906). See, e.g., May v. May, 210 Va. 584, 172 S.E.2d 717 (1970) (charging real estate with expenses); In re Estate of George F. Griffith, 1993 WL 946049 (Va. Cir. Ct. 1993) (criticizing estate administration where real estate expenses paid).





 



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