Probate, Estate Settlement, and Trust Administration
Virginia Trust and Estate Administration Attorneys
We will help you avoid personal liability as a fiduciary that can arise by making honest mistakes in the administration of an estate or trust. With our assistance, you can be assured that you are acting within the requirements of Federal and State laws and that all Federal and State Income, Estate, and Gift Tax returns will be prepared and filed accordingly.
What are the duties of an executor or administrator?
Proper administration of an estate involves a number of steps. When an individual passes away, an executor is typically appointed in a Will to handle the administrative tasks of the estate. In the absence of a Will, known as an intestate estate, an administrator is appointed. Regardless of his or her title, the personal representative of the estate is legally responsible for making sure that all necessary steps are taken to comply with laws regarding creditors, taxation, and distribution of assets to beneficiaries.
In Virginia, the executor must initially file the Will for probate with the Circuit Court of the city or county in which the deceased individual resided at the time of his or her death. Next, the executor is responsible for opening an estate account out of which any claims against the estate are to be paid. The executor must also re-title all assets changing the name in which they are held to the name of the estate. In order to perform these steps, a tax identification number must be acquired because social security numbers become invalid at death.
The executor should file forms with the Internal Revenue Service and pleadings with the Circuit Court to ensure that he or she is not held personally liable for any debts of the estate.
THERE ARE THREE PRIMARY TAXES WHICH MAY BE DUE:
- Probate tax
- Federal estate tax
- Federal and state income taxes
A probate tax will be due at the time an executor is qualified. Most localities in Virginia charge $1.33 per $1,000 of the estate’s probate value. Based on recent estate tax legislation, most estates in this country will escape the federal estate tax. Income taxes, however, must always be paid for any income generated by the estate between the date of death and the date when the estate is closed. In many cases, the executor will be responsible for filing a final personal income tax return for the deceased.
Trust and Estate Accounting
Within four months from the date an executor or administrator is qualified, he or she must submit an inventory of the estate’s assets with the Commissioner of Accounts. This inventory contains a detailed listing of the property addressed in the Will. The inventory will also list the market value of the assets or property as of the date of death. The value of some assets such as bank accounts, stocks or bonds can be easily determined. Other assets may require appraisals to determine market value as of the date of death.
In order to properly complete the administration of an estate, an accounting must be filed with the Commissioner of Accounts. The executor or administrator must obtain receipts from the beneficiaries acknowledging that they received their share of the estate, discharging the executor from further obligations to the estate, and accepting responsibility for their share of any debts imposed on the estate subsequent to their receiving the distribution.
Trust & Estate Law
The trustee has a very serious responsibility to all beneficiaries of the trust.
These responsibilities are spelled out in the Prudent Investor Act. This law requires the trustee to invest trust assets so that they are preserved but also so that they may grow in value for the benefit of the beneficiaries. Non-professional trustees are best advised to delegate this function to professional trustees or advisors.
What other laws must a trustee adhere to?
Trustees must follow the Uniform Principal and Income Act. Under this law certain items are designated as income and other items are designated as principal. This is extremely important under trust law, because the designations affect payments to beneficiaries. Periodic accountings and statements must be prepared and filed by the trustee following rules set by the Virginia Uniform Probate Code and Uniform Trust Code.
A trustee must file appropriate tax returns. These include trust or fiduciary federal and state income tax returns, which generate Schedule K-1s, which are given to beneficiaries to assist them in preparing their personal income tax returns.
An executor, an administrator or a trustee has significant personal liability both to tax authorities and to the beneficiaries. A good faith effort to be fair and reasonable is not sufficient to protect an executor, administrator or trustee from this liability. Serving in any of these capacities is a complex undertaking, which should not be attempted without professional assistance.