Administering an estate can seem overwhelming. If you are nominated to serve as the personal representative (executor) of a family member’s estate, you may wonder about the responsibilities of your proposed new role. Many people are simply unaware of what a personal representative actually does much less if it is necessary to qualify as personal representative to begin with. While some estates are complicated and require full administration, other estate are easy to administer; it may even be possible to use one of Virginia’s small estate processes and forego qualification as personal representative altogether. The first task you should do as a nominated personal representative is meet with an attorney familiar with administering an estate in Virginia to present you with your options, including whether you need to qualify.
If you do end up qualifying as personal representative, the formal probate process will include some or all of the following tasks.
Inventorying and Valuing Assets
A personal representative must “marshal” the estate’s assets, which involves identifying and gathering them. Estate assets may range from tangible personal property (“stuff”) of varying value, intangible personal property (money, stocks, bonds, financial accounts), and real estate. If the decedent did not keep accurate, up-to-date financial records, the personal representative may need to talk to others–such as the decedent’s accountant, financial advisor, or employer–to identify and locate all of the estate’s assets. Estate assets (and some joint, pay on death, or transfer on death accounts) must be listed on the estate Inventory which the personal representative must file within a short time after qualifying.
The Inventory must include the date of death value for all assets. Virginia has rules about how to value assets and which sources are preferred.
Filing Tax Returns
Benjamin Franklin is credited with saying that “in this world nothing can be said to be certain, except death and taxes.” Indeed, death itself does not eliminate the decedent’s obligation to file and pay taxes. The personal representative for the estate files any required final state (Form 760) and federal (Form 1040) income tax returns on behalf of the decedent individually. Any income earned by the estate after the decedent’s death, may require the personal representative to file fiduciary income tax returns.
Very few estates have to file federal estate tax returns, and even fewer have to pay federal estate taxes. Unless the decedent was exceptionally wealthy, it is unlikely an estate tax return needs to be filed. For decedents who pass away in 2021, the law exempts up to $11.7 million in assets from the estate tax, and the surviving spouse may claim the unused portion of the deceased spouse’s exemption, potentially increasing the amount that may pass estate tax free upon the death of the second by millions of dollars. The personal representative should consult with a tax professional experienced in filing estate tax returns for questions about whether the decedent’s estate may need to file an estate tax return.
Once the personal representative has gathered all of the estate’s assets, the personal representative is responsible for paying the decedent’s final bills, debts, and any administrative expenses related to the estate from those assets. If there are insufficient assets to pay all the bills, then the decedent was insolvent and Virginia law establishes which debts and expenses take priority. Failure to follow the strict hierarchy of debt payments as well as payment caps to creditors from an insolvent estate can subject the personal representative to personal liability. Any assets remaining after the payment of debts must be distributed according to the terms of the decedent’s will, or if there was no will, as provided in Virginia intestacy law.
Preparing the Estate Accounting
Once the creditors are paid and all claims against the estate are satisfied and the beneficiaries have received their proper share(s), then the estate is ready to be closed. In some circumstances, this closure can occur rather simply, with the filing of a particular affidavit. With full probate, however, the personal representative must file a formal estate Accounting with the assigned Commissioner of Accounts. The Accounting must show all of the property come into–and going back out of–the estate. An initial Accounting covers the first 12 months of estate administration, beginning with the date of the personal representative’s qualification, and needs to be filed, with all supporting documentation of every transaction, within 16 months of qualification. If the estate is not closed within the first accounting period, then the personal representative must file an accounting for each subsequent 12-month period until the estate is closed and the final accounting is approved.
We Can Assist You with Administering Your Loved One’s Estate
The above is an overview of some, but not all, of the major tasks a personal representative must accomplish when administering an estate. If your loved one has died and you have been nominated to serve as personal representative, please contact Promise Law today at (757) 690-2470 to set a free 30-minute consultation with an estate administration attorney to discuss your options, including whether full probate is necessary or advisable.