What Are the General Duties of the Executor/Administrator?

The administrator/executor (herein referred to as “personal representative”) has the responsibility of managing the decedent’s estate by receiving all probate assets of the estate, determining and paying all lawful debts of the estate, making distribution to the proper beneficiaries under the will, or in the case of intestacy, to the intestate heirs at law pursuant to the laws of intestate succession in effect in Virginia, and to report timely to the Commissioner of Accounts on the actions taken by the personal representative in handling the estate (inventory and accounts).

There is a high degree of care, diligence, personal and fiduciary obligation involved in the administration of an estate.  The personal representative is obligated to act as a prudent person in the care and management of the estate and to act in a manner consistent with the will and not in conflict with any applicable estate administration laws or the laws of intestacy.

The personal representative is barred from self dealing.  Quite simply, the personal representative may not gain any personal benefit from serving as executor or administrator except as provided by the will or by relevant Virginia law with respect to receiving reasonable compensation for serving as personal representative.

        WHAT ARE THE DIFFERENCCES BETWEEN AN EXECUTOR AND ADMINISTRATOR?

             There are important differences, including the following:

                   a. The executor has a probated will to direct administration and
            distribution to named beneficiaries; but an administrator has no will, and
            administration and distribution to heirs at law are directed by the Code of
            Virginia;

                   b. An administrator has control over personal property assets only,
            not real estate (unless a specific order has been entered by the Court
            granting the administrator the power to sell real estate); but generally an
            executor has control over real estate also by specific grant in the will-
            BUT not always. The will must be closely read to determine if power over
            real estate is granted in the will or if the statutory provisions of the
            Virginia Code granting that power are incorporated by reference, and if
            not, the executor also has no control over real estate.

                   c. Only “probate assets” are under the control of the personal
            representative. Assets which pass by designation (survivorship) in a
            document of title or written beneficiary designation are not within the
            control of the personal representative. For example, a life insurance
            policy with a named beneficiary is not under the control of the personal
            representative because the life insurance contract designates to whom
            the policy is payable. The same is true with title to property, personal and
            real, which is owned “with the right of survivorship” designated in the
            document of ownership.

 Specific Duties of the Personal Representative

                                                                      Taking Charge

The personal representative should take charge of and gain possession of all assets of the estate where necessary in order to carry out the obligations for the payment of taxes, debts and claims against the estate and the ultimate distribution of the estate in a manner consistent with the testator’s wishes as stated in the will or as required by the laws of intestate succession.

Federal Tax I.D. Number for the Estate

Apply online at www.irs.gov for a federal tax number (FEIN) for the estate. This is free, and you should not pay a fee to some online service to obtain the FEIN number.

      Estate Bank Account(s)

Open an estate bank account to handle all deposits or disbursements. Be sure to request that copies of the front of all checks written on the account (imaged copies) be included with the monthly bank statements, or that you will be able to retrieve copies of the front and back of checks if you intend to use online banking. If the assets on deposit exceed $25,000.00, the account must be an interest bearing account (unless the bank charges a monthly fee in excess of the interest that will be earned on the deposits), otherwise you may be charged interest lost to the estate. See Section 64.2-1501, Code of Virginia.

Notifications to be Made

There are certain notifications of death that should be made, for claim or refund purposes and for the protection of the estate from potential fraud by third parties trying to take advantage of the decedent’s death.

Consider making immediate verbal notification to the following:

1. Social Security Administration (800-772-1213);

2. Credit Agencies:

      a. Experion      (888-397-3742);

      b. Equifax         (800-685-1111);

      c. TransUnion   (800-888-4213).

Additional notification in writing, with a copy of the decedent’s death certificate, should be made to:

1. The decedent’s credit card companies;

2. Life, health and disability insurance companies;

3. The decedent’s banks/credit unions;

4. The Veterans’ Administration if applicable;

5. The decedent’s mortgage holder;

6. The decedent’s retirement/pension plan administrator;

7. The stock broker used by the decedent;

8. Clubs or other social membership organizations;

9. Dues paying membership organizations (health clubs, unions pro fessional organizations). 

Locating Assets and Determining Liabilities

You may have to search for the assets of the decedent. Review of the decedent’s papers will generally disclose the decedent’s banks, brokers, financial planners, CPA, attorney, life insurance companies and other entities who may hold assets of the decedent.

                                                     Forwarding Decedent’s Mail

 Change the forwarding address for the decedent’s mail at the post office so that you will receive all correspondence intended for the decedent. Read and save the mail and contact those who may hold assets and those to whom the decedent may have been indebted.

Secure the Decedent’s Residence if Unsecured

If the decedent’s real property is left vacant by death, immediately secure the property to protect/preserve all personal property, and the real estate. If someone is living there who is entitled to live there obtain their assurance that nothing will be removed and take photos of each room as a record.

                                                                Safe Deposit Box

Be sure to check for evidence of a safe deposit box at the decedent’s bank or visit banks near the decedent’s home to inquire of the existence of a box. The decedent’s safe deposit box should be opened and inventoried. It’s a good practice to have a bank employee present when opening the box so that it can be inventoried in the employee’s presence and an inventory list of the contents witnessed.

Hazard Insurance

Insurance may have to be in place to protect any tangible personal property not delivered to a named beneficiary which remains under the actual or constructive control of the personal representative, and any real estate which is part of the probate assets under your control.

Inventory of Personal Property

Tangible personal property specifically listed in the will should be distributed to the named beneficiaries provided there are sufficient assets to pay all debts of the estate.  If assets are insufficient to pay all debts, personal property may have to be sold to satisfy debts.  If the estate is potentially insolvent (insufficient assets to pay all debts) no distributions to beneficiaries of any property or cash, and no payments to creditors of the estate (including funeral expenses) should be made until the final determination has been made that all creditors can be paid and that the beneficiaries are entitled to a distribution. (See Section 64.2-528, Code of Virginia (1950), as amended.)

Intangible personal property includes certificates of deposit or investment accounts such as stocks and bonds, stocks issued in certificate form, deposits in checking and savings accounts, life insurance proceeds, or other such investment assets.  Once the determination is made that these assets were owned solely by the decedent, or by the decedent and a co-owner with no right of survivorship or no pay on death designation, those assets should be recovered by the fiduciary and deposited to an estate account.  Stocks and bonds should be re-registered in the name of the estate, but not necessarily liquidated.

Joint/P.O.D./Survivorship Bank Accounts

Remember that accounts held jointly or designated with the right of survivorship or payable on death are not part of the probate estate and generally will not be subject to your control and administration. (Note: There are exceptions if the estate  cannot pay its debts and a creditor makes a proper claim against the estate for the joint accounts to be used to pay estate debts. See Section 6.2-611, Code of Virginia). Joint or survivorship acounts are payable by the bank or other institution to the survivor named on the account or contract. Get a copy of the bank account card, contract naming a beneficiary or a letter from the life insurance company for your records to verify that the asset was a survivorship asset. Obtain a copy of the deed for any real estate to determine whether title was held “with the right of survivorship” or simply as “tenants in common” or “joint tenants” without survivorship. If survivorship is not stated on the deed it is part of the estate. NOTE: Power of Attorney accounts are fiduciary accounts not survivorship accounts unless the decedent personally established the account with the attorney in fact also as named beneficiary.

Notice of Probate and Qualification, and Affidavit of Notice

You are required by law to notify all heirs at law (the decedent’s heirs if he or she had died without a will), and all named beneficiaries under the will (if the decedent died testate), that the will has been probated and of your qualification as personal representative.  This notice of probate and qualification is required to be given within thirty (30) days of the date of your qualification.  It should be hand delivered or mailed to the correct address. (Form CC-1616).

After giving notice to beneficiaries and heirs at law, you are required, within four (4) months from the date of qualification, to complete the Affidavit of Notice (Form CC-1617) given to you at the time of qualification, and file the affidavit with the Clerk of the Henrico County Circuit Court.  You will pay from the estate $18.00 to the Clerk of Court as a filing fee (keep the receipt).  At the time of mailing or delivery to the Clerk, you should deliver or mail a copy to the Commissioner of Accounts.  Failure to give this notice and file the Affidavit of Notice will result in the issuance of a summons by the Commissioner of Accounts requiring the filing of the affidavit or a show cause order requiring your  appearance at the Commissioner’s office or appearance before the Judge of the Circuit Court to explain why this Affidavit of Notice has not been timely filed. 

Tax Identification Number and Estate Bank Account(s)

In most cases it is necessary to obtain a federal employer identification number (FEIN) for the estate.  You will use this in opening the estate checking account, reporting income tax owed by the estate or investing assets during the course of administration of the estate.

You may obtain the federal employer identification number online at www.irs.gov. You should obtain the FEIN without charge, at the IRS government website. If, in registering online, you are asked to pay for obtaining the number, exit the website, as you have been directed to a commercial site which charges you for obtaining the number which is issued free of charge! 

If you have an accountant, enrolled agent or an attorney assisting you with the administration of the estate, determine whether or not you or the professional assisting you has undertaken to obtain that IRS number.  This number should be used on all investments and accounts once you qualify.  The decedent’s social security number is no longer a proper number to be used for the estate.

Bank Accounts for the Estate

The account established for the estate must be an interest bearing account and should be titled in the estate’s name (i.e., the Estate of Jane Doe by John Doe, executor or John Doe, administrator), unless the balance on deposit will be so small that the bank will charge a service fee. If so, open a business checking account.  

******Set up the account so that images of all checks written during administration will be returned to you with each monthly bank statement; otherwise you will have to request copies of the front and back of all checks from the bank, or obtain them online, to file with your accounting.

Do not open a non-interest bearing account unless the deposits in the account will be less than $25,000.00, or less than the minimum required by the bank to avoid monthly service fees. If you do not open interest bearing accounts within four (4) months of receipt of the funds, you will be personally surcharged the interest lost to the estate. Section 64.2-1501, Code of Virginia (1950), as amended.

Do not continue to use the decedent’s bank accounts as an estate account. The decedent’s bank accounts should be closed and deposited into one new estate account.

Payment of Creditors Claims

All lawful debts and obligations of the estate must be paid or provided for prior to distribution to any beneficiary.  However, there are statutory provisions which may control the payment of debts, so be careful in paying liens against personal property specifically bequeathed, or liens against real estate specifically devised, to a beneficiary. (Section 64.2-531, Code of Virginia) Consult with your estate attorney before paying these liens.

As previously mentioned, if there is a possibility the estate is insolvent (more debts than asset value), you should defer all disbursements and distributions until the determination has been made that all claims have been identified and all claims against the estate can be paid from existing assets, and if not, the proper priority for the payment of expenses, claims and debts. If the estate is insolvent, immediately consult with an experienced estate administration attorney.

Only lawful debts of the estate should be paid.  If the statute of limitations has expired on a claim against the decedent’s estate, the payment of that obligation by the fiduciary is wrongful and subjects the fiduciary to personal liability for that payment.  If you have a question as to whether or not a claim or debt against the estate is lawful, you should consult with an estate attorney.  If you are uncertain as to whether or not a claim is valid or contest the validity of any claim, you should request a debts and demands hearing by letter to the Commissioner of Accounts.

The debts and demands  process will determine the validity of all disputed claims and will protect the fiduciary from personal liability, if the process is used in conjunction with a Petition for a Show Cause Against Distribution which results in an Order of Distribution by the Circuit Court ordering the distribution of the estate to the beneficiaries.  The Petition for Show Cause Against Distribution may be obtained only if an accounting has been filed with the Commissioner and has been approved, and the debts and demands proceeding has been conducted. You will need the services of an estate attorney to complete this full procedure.

You are not required to use the debts and demands procedure, however, if you wish statutory protection from personal liability for claims filed after you distribute the estate, you must use the debts and demands hearing and show cause against distribution procedure. (See Section 64.2-550, Code of Virginia (1950), as amended.)

NON-EXONERATION OF LIENS & ENCUMBRANCES

Be careful paying liens and encumbrances on specifically bequeathed personal property or specifically devised real property. In the absence of specific language in the will directing the payment of these liens from estate assets, the named specific beneficiary takes the bequest or devise “subject to” the lien or encumbrance, thus requiring the beneficiary to pay the lien or encumbrance if the beneficiary wishes to keep the bequest or devise and not have it lost to repossession or foreclosure for default.

For example, if the will states: “I give and bequeath my Mustang to my nephew, Johnny…”, and the car has a $5,000.00 lien against it at the decedent’s death, with no further specific direction to pay the lien in the will, Johnny would take the Mustang “subject to” the lien and would be obligated to pay the $5,000.00 lien if he wishes to retain possession. However, he has no personal liability on the note. The executor has no duty (or right) to satisfy the lien and deliver the Mustang free of the debt, However, under current law the estate remains liable on the note, and if nephew defaults the estate could ultimately have to pay the debt. Since the issue of ultimate liability for the debt is not addressed by the statute (Section 64.2-531, Code of Virginia), if this situation exists in the estate you are administering, you should consult with an estate attorney before making distribution of the item to the specific beneficiary.

NON-EXONERATION CAVEAT

Additional problems can result from this situation as the referenced statute fails to address the ultimate liability issues in the event of default by the beneficiary. There is no present provision for release of the estate from the debt, but the July 1, 2017 amendment to Section 64.2-531, may provide protection to the executor, if the procedure described therein is properly followed. The statute does not impose personal liability on the beneficiary. Therefore, if assets specifically bequeathed or devised are in default at decedent’s death, have unpaid liens at the decedent’s death,  are considered “under water”, or are subject to “acceleration” due to the decedent’s death, you should consult with an experienced estate administration attorney before paying the lien or delivering the property to the beneficiary without some assurance that the debt will be paid by the beneficiary and not come back on the estate or personal representative if the beneficiary fails to make all payments.

AMENDMENT TO NON-EXONERATION STATUTE Effective 7/1/2017

Effective July 1, 2017, the General Assembly has enacted an amendment to Section 64.2-531, Code of Virginia, which provides a method for a personal representative to avoid possible personal liability for delivering a specifically bequeathed or devised asset to a beneficiary with the lien on the asset unsatisfied. You are encouraged to investigate this additional protection if you have a specific bequest or devise in the decedent’s will that is subject to a lien or encumbrance; or better yet, consult with an estate attorney for advice on the best way to handle the situation in a manner which gives you the best possible protection from personal liability and still carry out the decedent’s wishes.

INSOLVENT ESTATES

      If the estate  is insolvent, there are statutory provisions which control the order in which the debts of, and claims against, the estate must be paid.

If there is a possibility the estate is insolvent (more debts than asset value), you should defer all disbursements and distributions until the determination has been madTransfer on Death Real Property (TOD DEED)

Effective on or after July 1, 2013, a person, during his/her lifetime, may record a transfer on death (TOD) deed which transfers real estate to a named beneficiary immediately upon death. This type of property is not listed on the inventory since it passes by survivorship (TOD) designation. 

CAVEAT: TOD real estate is subject to the claims of the decedent’s estate by statute, if the decedent’s estate is otherwise unable to satisfy all claims and debts. Therefore, you may be required to provide to the Commissioner, a copy of the recorded TOD deed; and the property may be claimed by the estate’s personal representative as part of the probate assets to the extent necessary to satisfy claims. See: Uniform Real Property Transfer On Death Act, Sections 64.2-621, et seq., Code of Virginia (1950), as amended.

What Powers Do You Have with Respect to Real Estate?

This is an area of frequent mistakes and misunderstandings:

         For Testate Estates (Decedents dying with a will)

1. If the will of a decedent directs the fiduciary to sell real estate then it is to be sold and the proceeds administered as directed by the will.

2. Wills generally include the power of sale by specific language or incorporation by reference of Section 64.2-105, Code of Virginia (1950)(previously Section 64.1-57, Code of Virginia), as amended.  This power of sale is not, however, a directive to sell. 

   If the estate has sufficient assets to pay its debts and all specific bequests, and the personal representative does not need to sell the real estate to satisfy a mortgage or to pay other debts and expenses of the estate, it is generally not necessary for an executor to sell real estate.  The reason for this is that real estate is the last asset of a decedent which is looked to for the payment of the decedent’s debts, unless otherwise directed in the will. The will may specifically state that all expenses are to be paid from the proceeds of sale of the real estate.  

   Generally, personal property must be exhausted before real estate is sold to pay the decedent’s obligations, but be careful that the will does not direct otherwise.

   Understand that real estate passes, by operation of law, to the beneficiaries named in the will once the will is probated; however, this passage of title is subject to the executor’s power to sell the real estate, if granted in the will. Therefore, until the executor makes a proper decision to sell real estate, it is owned by the beneficiaries under the will, subject to the right, and possibly obligation, of the executor to divest the beneficiaries of title and sell the real estate to pay lawful debts of the estate. (Do not sell specifically devised real estate before consulting an estate administration attorney).

3. Quite often it is desirable for the executor who has power of sale to sell the real estate rather than have the real estate pass to the named beneficiary(ies).  If the beneficiary is a minor it is generally undesirable to have a minor own real estate, especially a very young beneficiary.  It is recommended that the fiduciary obtain the approval of the minor’s guardians and the Commissioner of Accounts for the sale of the minor’s property rather than a distribution of the real estate to the minor.  In that manner the minor receives the benefit of the real estate but in the form of cash which is held in trust, or in a custodial or guardianship account until the minor reaches the age of majority (18) or age of distribution as provided by the will.

   Often there are many beneficiaries of the real estate.  If the residuary provisions of the will have many beneficiaries inheriting real property, it is unlikely that those beneficiaries will be able to agree on the disposition of the real estate or they may not wish to own a minority interest in the real estate.  With the consent of the Commissioner of Accounts and/or the written consent of all residuary beneficiaries, the executor may sell the real estate (provided he has power of sale in the will or by court order) and administer the net proceeds as part of the estate, saving the residuary beneficiaries from the tedious process of circulating sales contracts, listing agreements, deeds and other documents for the consent of all to obtain the sale; or having to file an independent lawsuit (partition suit) to force a sale among all the joint owners.

4. NOTE : Specifically devised real estate should not be sold by the executor except in very rare situations, which should be discussed with legal counsel. SEE: Non-Exoneration above.

      For Intestate Estates (Decedents dying without a will)

1. Intestate succession to real estate is a completely different situation.  The administrator of an estate of a decedent who died without a will has no power of sale over real estate without specific order of the Court.  This order may be obtained by petition to the Court requesting the power to administer and sell real estate.  This is necessary only where the real estate is needed to satisfy debts and obligations of the estate or satisfy an existing mortgage.  The services of an attorney are necessary in determining if it is prudent to request the power of sale, and if so in filing the petition and obtaining the order.  Without that order, an administrator has no control over the real estate of a decedent.  It is not part of the probate estate and will pass by operation of law to the intestate beneficiaries, subject to being taken by the administrator under Court order granting the power of sale.

   Do not try to sell real estate as an administrator without having received the authority of the Court to do so. Debts related to the real estate become the obligation of the heirs at law and should not be paid from the estate. The heirs should personally pay all real estate taxes, insurance, utilities and maintenance costs after the decedent’s death unless a specific court order grants the administrator control over the real estate.

          Consult with an attorney to determine if petitioning for the power to sell is prudent.

Payment of Taxes

It is the personal representative’s obligation to pay various types of taxes that may be associated with estate administration.

1. The decedent’s final income tax return must be filed.  This is for income earned during the year of the decedent’s death up to the date of death, and will be reported under the decedent’s social security number.  This applies to Virginia and federal income taxes. NOTE: Prior unfiled years will also have to be filed.

2. The estate may be subject to a fiduciary income tax owed by the estate on income earned by the estate from the date of qualification until the close out of the estate.  If the estate has income from interest, dividends, rents or other sources during administration, fiduciary income tax would be payable to Virginia and to the federal government.  You should consult with a CPA as to the estate’s liability to pay all income taxes.

3. The estate may be subject to Estate Taxes.  Most estates are not subject to estate taxes either on the Virginia or federal level.  There is currently an exemption for an estate from the payment of federal estate taxes which results in most estates not having to file federal estate tax returns.. This however may change, and possibly on a retroactive basis. (Note that this exemption limit is subject to continuous modification).  If the taxable estate does not exceed the exemption value established by Congress no estate taxes are payable.  However, you should consult with a CPA or an estate tax attorney to determine whether or not the total taxable estate exceeds the current federal exemption.

   Remember:  You will be administering assets which are part of the probate estate, but the total taxable estate may be much larger because of assets passing by survivorship, pay on death designation, T.O.D. designation, or beneficiary designation such as real estate, life insurance, and bank or investment accounts or as part of a trust.