The Ten Problems With Your Estate Plan And How To Fix Them. Problem #3: Issues Surrounding Probate

The Ten Problems With Your Estate Plan And How To Fix Them. Problem #3: Issues Surrounding Probate

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Today we are going to talk about probate – what it is and, perhaps more importantly, how to avoid it. The reasons to avoid probate will become clearer as we discuss it, but let’s start with the basics. So, what is probate? Legally speaking, probate is the process by which a document is validated as a Will and then admitted to the record. However, when most folks refer to probate, they are using the term to encompass the entire process of settling someone’s estate after they die. This process is also known as the administration of the estate and generally takes between nine months and two years to complete. Going forward, we will use the second, lay-meaning of the word probate.

Starting the Probate Process

The probate process begins with a death. Death, especially the death of a loved one, can be an emotionally fraught time. It is important to take time to grieve. Although there is no statutory time requirement to begin the probate process, we do recommend starting the process no later than 30 days after the date of death. Most folks start the process a few days after the funeral.

Some of the legal language used can be confusing, so let’s define some terms.

  • Personal Representative is the first term of interest. Personal Representative is a catch-all term for the executor or administrator for an estate.
  • An executor is a person named in a Will who is responsible for carrying out the provisions set forth in the Will.
  • Surety bond is like “insurance” that ensures the executor properly fulfills his or her duties.
  • An administrator is a person named by a court to settle an estate for an individual who either died without a Will or where the executors named in the Will are unwilling or unable to serve.
  • Finally, a testator is the name given to a person who creates a Will.

It is worth noting that executors have a statutory right to take fees from the probate estate for their work administering an estate. These fees are calculated based on the overall value of the assets moving through probate at a marginal rate (just like federal income tax rates) of a rate between three to five percent. By way of an example, the executor fees in Virginia on an estate valued at $1,000,000 are $41,000. Executor fees do not include the fees assessed by the court or commissioner of accounts (discussed below).

Issues Around Executors

An executor qualifying on an estate is a bell you cannot unring; therefore, a preliminary question must be answered before considering qualification. That question is – How much money is left in the probate estate? The answer to this question is of great importance. If the total estate is valued less than $50,000 in aggregate, an abbreviated process is available to the executor. (The process is further abbreviated for estates under $25,000.) The executor can begin this abbreviated process by filing a Small Estate Affidavit with the clerk of court. However, qualifying as an executor prevents the filing of the Small Estate Affidavit and the executor will then be stuck going through the entire probate process.

For estates with greater than $50,000 in assets, probate begins with the executor qualifying before the Clerk of the Circuit Court. The executor qualifies before the Clerk of the Circuit Court in the city or county where the decedent (the person who passed) last resided. If the last place of residence is unknown, then the qualification will take place in the jurisdiction where the decedent owned real estate or, if there is no real estate, where the decedent passed. For the purposes of qualification, the place of residence does not include places where the decedent temporarily lived, like nursing homes or convalescent centers. If the executor is not a Virginia resident, they will need to nominate a Virginia resident to serve as their agent in the Commonwealth and pay for a surety bond. Although a Will can waive the bond requirement for Virginia residents, the bond requirement cannot be waived for individuals who permanently live outside the Commonwealth.

In cases where an executor is unwilling or unable to perform their duties, the executor must formally waive their qualification. Once this waiver occurs, the next individual named in the Will becomes the executor, if they are willing and able. If the next person is neither willing nor able, or if there are no successor executors named, after a period of 30 days from the date of death, any beneficiary may serve as an administrator under the Will. If no one is willing or able to be named an administrator, the clerk may name a creditor to administer the estate after a period of 60 days.

Providing Notice

Once the subject of who is going to serve as the estate’s Personal Representative to administer the estate is settled, the next step is to provide notice as provided by the Virginia Code. Written notice must be provided to the surviving spouse of the decedent; all living and ascertained beneficiaries under the Will; and all the decedent’s heirs as defined in the Virginia Code, whether or not there is a Will. This notice must be provided to the aforementioned persons within 30 days from the date of qualification, and an affidavit attesting to the fact that the required notice has been given is due to the commissioner of accounts no later than four months from the date of qualification. Failure to file the required notice can result in delays as well as penalties being assessed personally against the executor.

Filing Inventory

The next step is to file an inventory with the commissioner of accounts no later than four months after the date of qualification. The preparation of the inventory requires the Personal Representative to identify all the assets in the name of the decedent alone, as well as certain jointly held assets, and assess their value on the date of death. The valuation must be fair market value as of the date of death (not on the date the inventory was conducted). The inventory prepared and filed with the commissioner of accounts establishes the assets that must be distributed during the accounting. A fee is due at the time the inventory is delivered to the commissioner of accounts, not to exceed $275.

Accounting

Then comes the accounting. The first accounting is due within 16 months of qualification and will cover the first 12 months of administration. Should additional accountings be required, they must be submitted annually from the four- month qualification date for each filing submitted to the commissioner of accounts. In the accountings, the Personal Representative must “balance the book” and account for all receipts, distributions, and disbursements. A fee based upon the value of the probate estate, not to exceed $11,000, is due to the commissioner of accounts with the filing of each accounting. In order to finalize and close the probate, a Personal Representative must file a final accounting. This final accounting must demonstrate zero assets remaining in the estate and cannot be filed less than six months from the date of qualification. A tax certificate must also be filed at the same time as the final accounting. The tax certificate shows that the Personal Representative has satisfied all taxes assessed against the decedent, or that there are sufficient sums remaining in the estate to satisfy the outstanding taxes.

Once the final accounting is accepted by the commissioner of accounts, the probate is closed. That being said, there is no reason to go through probate. With proper estate planning and proper coordination of your assets, you can avoid probate altogether. Call us now to set up an appointment and avoid the time and costs of probate.

DID YOU KNOW?

*Did you know communicating responsively to our clients is important to us? If you send us something and don't hear from us, please give us a call to confirm we received it.

*Did you know that the attorneys at Johnson, Gasink and Baxter, LLP have built their practice by working with great clients like you? We are now offering small estate planning classes for clients and their friends. Class attendees will learn about their estate planning options, the dangers and expense of probate, and how to effectively utilize a Revocable Living Trust plan. The classes are offered at the following dates and locations:

  • May 7th at 2:00 and 7:00 near our Richmond office
  • June 11th at 2:00 in our Virginia Beach office

Don't let something happen to your friends and loved ones without proper estate planning in place! Please contact Brooke Heilesen at 1 877 790 4555 to reserve a spot in a class.

About the Author:

Mike Hendricks is an associate with Johnson, Gasink & Baxter, LLP, where his practice focuses on estate planning, probate, business law, asset protection, and administration of trusts and wills. Mike understands that each client is unique and each situation distinct. Together, with the team at Johnson, Gasink & Baxter, LLP, he works to protect his clients and to safeguard their loved ones and their interests.

Outside of work, Mike and his wife Meg spend the vast majority of their time chasing after an energetic and highly mobile toddler. Mike currently serves on the Board of Directors for the West Point Society of Williamsburg.

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