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Fairfax, VA Probate Blog

Thursday, March 27, 2014

Filing the Inventory: Probate Filing

Every Executor and Administrator is required to file an Inventory with the Commissioner of Accounts Probate Section within 4 months of qualification. Because every Accounting that subsequently will be filed is based on the numbers provided in the inventory, it is critical to (i) properly list the correct assets in the correct section of the inventory and (ii) list those assets at the correct values.

Probate Attorney Note: If you list assets in the wrong section of the Inventory the Commissioner of Accounts will likely not notify you. So it is critical that you hire a probate attorney before the inventory is filed. 

Probate Attorney Note: The Inventory lists the decedent’s assets at the Date of Death. Consequently, you will need to contact financial institutions and discover what the DOD value was for most financial accounts. In addition, you will need to prove said value to the Commissioner so get it in writing.

 

The Fairfax Virginia Commissioner of Accounts provides the following information on their website.

In all estates, a fiduciary’s relationship with the commissioner begins with the filing of an inventory, due four months after qualification with the circuit court.1 The inventory provides a record of all assets under the fiduciary’s supervision and control. As all future actions are based upon this inventory, it is “of vital importance. It is the starting point and the basis upon which the accounting rests.”2 Math should not be a lost art or an arcane discipline. Correct addition and subtraction of the columns in the inventory will accelerate its review and approval.

Inventory assets should be valued at the fair market value as of the date of the decedent’s death, not the date the inventory was prepared. Assets for which there is an established market value, such as stocks and bonds, should be reported at that value as of the effective date of the inventory. Estimated values are acceptable in the case of ordinary household goods. The fiduciary should obtain appraisals of personal property which has unusual value or is a collectible. Real estate may be listed at the assessed value for local real estate taxes or the fiduciary may submit an appraisal of its fair market value. Assets are listed at the gross value of the asset, without reduction for any debt, mortgage or lien against the property. The valuation of assets for inventory purposes has tax implications. The fiduciary may wish to consult with a tax advisor before filing the inventory.

The inventory form states that “[t]he Commissioner of Accounts has not independently verified the value of the items on the inventory or the fact that they are the only assets of the estate.”3 From the perspective of the commissioner, the inventory is presumed to be correct. Those interested in the estate may wish to object to the inventory. The office of the Fairfax commissioner has consistently taken the position that objections to an inventory are proper matters to be heard pursuant to § 64.2-1209 of the Virginia Code, which provides that "[Any interested person, or next friend of an interested person], may, before the commissioner of accounts, insist upon or object to anything which could be insisted upon or objected to by such interested person if the commissioner of accounts were acting under an order of a circuit court for the settlement of a fiduciary's accounts made in a suit to which such interested person was a party."4 As the Code section refers specifically to an account, it is generally the practice of the Fairfax commissioner to at least require the filing of an account before convening a hearing pursuant to § 64.2-1209 concerning objections to an inventory. This gives the fiduciary an opportunity to make adjustments to the assets stated in the inventory in the account prior to the hearing.

Under § 64.2-1300.E of the Virginia Code, in the case of after-discovered or received assets, a fiduciary has the option of filing an amended inventory or, with the permission of the commissioner, showing the after-discovered asset on the next regular account. In Fairfax, the commissioner routinely gives permission to show after-discovered assets on the next regular account, obviating the need for most amended inventories.

Virginia Code § 64.2-508 requires that a fiduciary give notice of the estate to all interested parties within thirty days of qualification and to file an affidavit of such notice within four months of qualification. The notice advises interested parties of the filing schedule for the estate and notifies them of their right to obtain copies of the filings by requesting the same from the fiduciary. The commissioner is prohibited from approving “any settlement” until the fiduciary files the required affidavit. The commissioner has responsibility to enforce the filing of the affidavit. As the statute specifically refers to settlement of an account, the Manual for Commissioners of Account states that “the Commissioner should approve the inventory regardless of whether the affidavit has been filed.”5 In Fairfax, the commissioner has declined to follow this interpretation of the Virginia Code. In the opinion of the Fairfax commissioner, the required notice is the primary legal basis for an heir or other party to become aware of a pending estate in which that person might have an interest. If the notice is not timely and properly given, it may be ineffective if the assets have been disbursed prior to the filing of the first account. Therefore, in Fairfax, the commissioner requires the filing of a proper affidavit of notice as a part of the approval of the initial inventory.

The reporting on the inventory form of assets which the decedent owned jointly with another is far from uniform. The only assets to be reported in part 2 of the inventory are the interests of the decedent in “multiple party accounts and certificates of deposit in banks and credit unions.”6 Basically, this limits the scope of part 2 to the decedent’s interest in bank accounts which pass to another by virtue of a right of survivorship. This includes jointly-held bank accounts or bank accounts which contain a “payment on death” provision (POD accounts). The inventory does not include jointly-held brokerage accounts, mutual funds, or real estate.

Secondly, that portion of such accounts includible in the inventory is only the decedent’s interest in the accounts. Generally the valuation should be limited to the proportionate share of the decedent in any such accounts at financial institutions. These amounts are reported in the inventory as such joint accounts may be subject to claims of the decedent’s creditors.7 Fiduciaries should also note that divorce extinguishes rights of survivorship in multi-party accounts and renders them tenancies in common.8 The decedent’s interest in multi-party accounts that are subject to this statute should be reported in part 1 as assets of the decedent.

Fiduciaries also frequently make erroneous reports of a decedent’s real estate holdings. The inventory includes real estate which the decedent owned, or in which he had a partial interest; however, it does not include in any form the decedent’s jointly-held real estate which passes pursuant to a retained right of survivorship. Fiduciaries should take care to report real-estate related assets correctly. Interests in a real-estate partnership or a real-estate limited liability company are personal property, reportable in part 1 of the inventory. Interests in condominium property,9 cooperatives,10 or time-share interests11 are real estate interests,12 reportable in parts 3, 4 and 5 of the inventory.

If the fiduciary has the power of sale to sell real estate, the fair market value of the decedent’s real estate is included in part 3. Even real estate that has been specifically devised must be included if the fiduciary has a general power of sale.13 The power to sell real estate may be express in the will or may be incorporated by reference. Virginia Code § 64.2-1300.A, the general powers provision routinely incorporated in most wills, includes the power to sell real estate. If the fiduciary has the power to sell real estate, this increases the probate estate and the amount of the requisite bond.

Virginia Code Section 64.2-1300 Inventories to be filed with commissioners of accounts

A. Every personal representative or curator shall, within four months after the date of the order conferring his authority, return to the commissioner of accounts an inventory of all the personal estate under his supervision and control, the decedent's interest in any multiple party account in any financial institution, all real estate over which he has the power of sale, and any other real estate that is an asset of the decedent's estate, whether or not situated in the Commonwealth. Every personal representative or curator shall also return to the commissioner of accounts an inventory of any such assets discovered thereafter as provided in subsection E.

B. Every guardian of an estate, conservator, or committee shall, within four months after the date of the order conferring his authority, return to the commissioner of accounts an inventory of the ward's personal estate under his supervision and control, the ward's real estate, the ward's legal or equitable ownership interest in any real or personal property that will pass to another at the ward's death by a means other than testate or intestate succession, and any periodic payments of money to which the ward is entitled. Every guardian of an estate, conservator, or committee shall also return to the commissioner of accounts an inventory of any such assets discovered thereafter as provided in subsection E.

C. Every trustee who qualifies in the circuit court clerk's office shall, within four months after the first date that any assets are received, return to the commissioner of accounts an inventory of the real and personal estate which is under the trustee's supervision and control. Every such trustee shall also return to the commissioner of accounts an inventory of any such assets received thereafter as provided in subsection E. However, any trustee who is not required to account under the provisions of § 64.2-1307 shall be exempted from the duty to file an inventory for as long as there remains no duty to file annual accounts with the commissioner of accounts.

D. In listing property pursuant to subsection A, B, or C, the fiduciary shall place the market value on each item. The market value shall be determined as of (i) the date of death if a decedent's estate; (ii) the date assets are received by the trustee if a trust; or (iii) the date of qualification in all other cases. Any reasonable expense incurred in determining such values shall be allowable as a cost of the administration of the estate.

E. In the case of assets discovered or received by a fiduciary after filing an inventory, the further inventory required by subsections A, B, and C may be made by filing an amended inventory showing all assets of the estate or trust, by filing an additional inventory showing only the after-discovered assets or, with the permission of the commissioner of accounts, by showing the after-discovered assets on the estate's or trust's next regular accounting. The filing shall be made or the permission granted within four months after the discovery or receipt of the assets.




The Lenzi Law Firm, PLLC assists clients throughout Northern Virginia and Washington D.C. including Fort Washington, Falls Church, Ft. Myer, Vienna, Rosslyn, Springfield, Mount Vernon, Annandale, Fort Belvoir, Fairfax, Dunn Loring, Merrifield, McLean, Oakton, Reston, Burke, Great Falls, Fredericksburg, Stafford and Herndon in Arlington County, Alexandria County, & Fairfax County.



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