Inventory by the Trustee
What is the Inventory?
The inventory is a listing of all the assets received by the trustee from the executor of the estate including partial and final distributions. These assets are reported on the approved inventory Form CC-1673, with the office of Commissioner of Accounts. Instructions for completing the inventory by a testamentary trustee are available on Form CC-1673 (INST) and should be consulted to be sure that the assets are being properly listed on the inventory.
How to Complete the Trust Inventory
Instructions on the proper completion of the inventory by a trustee are provided in Form CC-1673 (INST), and this form should be consulted at the time the inventory is prepared.
Where is the Inventory Filed?
The inventory is filed in duplicate in the office of the Commissioner of Accounts for Henrico County and not with the Clerk’s office of the Henrico County Circuit Court.
When is the Inventory Filed?
An inventory must be filed in duplicate with the office of the Commissioner of Accounts within four (4) months of the funding of the trust. This is not four months from the date of qualification, but four months from the date the trustee first receives assets distributed from the estate. The trustee shall not wait until all distributions have been made from the estate to file an inventory if the 4 month deadline arrives before all distributions have been received by the trustee. Additional assets will be shown under “adjustments” on the first or subsequent trust account account.
Preparation of the Trust Inventory
The trust inventory must be prepared and filed in duplicate within four (4) months of funding of the trust with the Commissioner of Accounts on Form CC-1673. At the time of your qualification as testamentary trustee you were given the inventory, Form CC-1673, and Form CC-1673 (INST), very good and brief instructions for properly completing the inventory. The instructions are specific and give you all of the information needed to properly complete the inventory.
It is critical that the inventory be correctly stated as it is the foundation for future trust accounts to be filed on an annual basis. The following instructions are intended to assist you in the preparation of the inventory.
WAIVER OF INVENTORY AND ACCOUNTS
NOTE: If the Will waives the obligation for you, as trustee, to account and you timely comply with Section 64.2-1307, Code of Virginia (1950), as amended, you will not have to file a trust inventory or accounts unless requested by a trust beneficiary. If you fail to timely comply with the stated code section, but comply after the due date for the inventory, you are required to file the inventory. The waiver of accounts is prospective only, not retroactive, as far as accounting obligations are concerned.
You must have qualified as trustee before the clerk and posted bond prior to making any election as trustee.
The Commissioner of Accounts’ office will not advise you on compliance with the waiver of accounts statute and will not prepare the waiver for you. We will review the waiver for statutory compliance upon receipt of the required signed documents and the filing fee of $25.00. If you do not understand the statute and how to comply, you should consult with an estate and trust attorney.
RELEASE OF SURETY BOND: If you have complied with the waiver of accounts and were required to post a surety bond as trustee, the Commissioner’s Office cannot, and will not, arrange for the release of your surety bond when you have finished administration of the trust. The procedure for obtaining a release of the surety bond when the trust terminates is by petition to the Henrico Circuit Court. Do not contact this office as we do not prepare such petitions. It will probably be necessary for you to consult with an estate attorney to arrange for the surety bond release.
COMPLETING THE INVENTORY
All inventories must be stated in a form which is legible and comprehensible. Therefore font size of the entries not less than 10 points should be used for all entries. Inventories stated in smaller font size, or which are not legible, will be returned to be restated.
INVENTORY FORM CC-1673
The inventory must be signed by all trustees and filed in duplicate with the Commissioner of Accounts. The Commissioner’s fees as set forth on the current Schedule of Fees of the Commissioner of Accounts and the appropriate Clerk of Court’s filing fees should be presented with the inventory.
The fees for a supplemental, amended or restated inventory are $110 plus clerk’s fee of $18.00.
The fair market value of assets received from the decedent’s estate by you as trustee of the trust established by the will should be the value of the asset used on the trust inventory. For example, if the executor transfers 100 shares of Exxon Mobil which was carried by the executor at $50.00/share, and the value has increased at the time the trust receives the same stock to $75.00/share, the $75.00 per share value should be used on the trust inventory, and that value becomes the carrying value of the asset for future accounts. Fair market values will be additionally reported at the end of each accounting but the account will be balanced on the carrying value if the same asset is still held in trust. Gains or losses will be calculated for any sale of assets during the trust administration. No adjustments for changes in market value are necessary if the same asset is held at the end of the accounting period as was held at the beginning date of the account.
The first section of the inventory lists all assets under your control as trustee except real estate.
Items must be specifically identified, except for groupings of furniture which are not antiques.
For example, if the executor transfers to you as trustee an automobile it should be listed for the same value that the executor listed it as distributed on the estate account. If you, as trustee, later sell the car you will show a gain or loss on your next accounting to reflect the difference between the value assigned when you received the car (carrying value) and the proceeds received when you disposed of it by sale.
The assets shown on the inventory are those transferred to you from the decedent’s estate by the executor, not what you may invest in after receiving the asset from the executor. For example, if the executor transfers by check $50,000.00 to you and you immediately invest in two $25,000.00 certificates of deposit at a bank, the inventory should report “cash transfer from executor of the Estate of John Doe…$50,000.00”. Do not list on the inventory the two certificates of deposit as these were not assets received by you, but rather what you did with the original transfer.
The trust inventory reports assets in the form you receive them from the estate and at the fair market value on the date received into the trust.
If the executor transfers a brokerage account to you as trustee you must list all individual components of the brokerage account. Do not list “Morgan Stanley Brokerage Account #0000……$300,000.00” and nothing more. The individual investments in that account must be listed by stock, number of shares, per share value and total fair market value. A separate listing may be attached to the inventory and in Part 1 the following entry made: “Morgan Stanley Brokerage Account #0000 – see attached listing”.
Notes and bonds received from the estate should be listed individually by obligor (or issuer), the face amount, the balance due (on a note), the interest rate and the maturity date.
If an interest in a business is transferred to you it may be listed in one of two ways depending on the type of business interest:
- Sole Proprietorship
If the business is a sole proprietorship and not a corporation or limited liability company you must list the various assets of the business and values unless you have a business appraisal which supports a cumulative value and provide that with the inventory.
If real estate is part of the sole proprietorship it should be listed separately under Parts 2, 3 or 4 of the inventory.
- Interests in a closely held corporation, partnership or limited liability company
Any interest in a partnership, limited liability company or corporation is a Part 1 asset even if the corporation owns real estate and even if the entity owns nothing but real estate. The value is the value of the interest in the entity and is usually based on a business interest valuation. Such interest should be reported as follows: “one sixth (1/6th) partnership interest in Soaring Eagles General Partnership….$125,000.00”. Do not list the individual assets of the business entity (unless it is a sole proprietorship).
An interest in a lease may be transferred to the trust. This is a Part 1 asset even though it involves real estate.
Often an interest in a partnership, limited liability company or other business entity has no recognized fair market value. In such case, if no business valuation has been completed by the filing date for the inventory, the value should be shown on the inventory at $1.00 until a more precise value can be determined and reflected by “adjustment” in the first trust account.
List by street address and/or legal description, any real estate located in Virginia over which you have power of sale. Do you have power of sale? Reference to the decedent’s will generally determines the answer. A specific grant to the trustee of the power to sell real estate or incorporation by reference of the statutory powers of Section 64.2-105, Code of Virginia (1950), as amended, confers that power.
Unless specifically prohibited by the Will and/or Trust provisions, the Uniform Trust Code, Sections 64.2-777 and 64.2-778, Code of Virginia (1950), as amended, confer the power to sell real estate on all trustees.
Therefore in almost all cases you, as trustee, will have the power of sale over real estate.
Remember that partial interests in real estate (not in a corporate entity owning real estate) are listed in Part 2. For example, if the trust has been delivered a 1/6th interest in Blackacre, Henrico County, Virginia, then 1/6th of the tax assessed or appraised value is reported in Part 2. But, if the trust has a 1/6th interest in Soaring Eagles, LLC, which owns Blackacre, that interest is listed in Part 1 as a personal property interest.
The value to be stated for the real estate is the fair market value on the date the real estate was transferred to you as trustee, which is generally the local tax assessed value in the year of transfer. If for some reason a change in the value needs to be made after the filing of the inventory based on a current real estate appraisal, it can be entered under “adjustments”. This is rarely necessary.
The value of real estate (or any other asset) reported on the inventory is not reduced by the amounts of mortgages, judgments or other claims against the real estate. It is the full tax assessed value or full appraised value without reduction for any liens and encumbrances. The tax assessed value of Henrico County real estate may be obtained online at www.co.henrico.va.us.
Real estate in Virginia over which you do not have power of sale should be listed by address or legal description, state of location, and the fair market value at which the property was transferred to you as trustee. Only if the trust document prohibits the trustee from selling real estate will the trustee not have the power of sale since Virginia’s adoption of the Uniform Trust Code.
Remember that partial interests in real estate are reported as well as entire interests transferred to you, such as a 1/6th interest in Blackacre, Henrico, Virginia. (See the instructions stated in preceding Part 2).
The trustee reports by address or legal description, state or country of location and value any direct real estate interest, whole or partial, in real estate outside of the Commonwealth of Virginia.
Remember not to list in this section a partial interest in a corporation or partnership owning real estate outside of Virginia. If the decedent owned a one half (½) interest in Diving Pelican Partnership which owns a beach home in Florida, that interest is a personal property interest and should be listed in Part 1. If the interest owed is a deeded interest in the non-Virginia real estate itself (and not a partnership, or other corporate entity), the interest is listed in Part 4.