As our practice continues to expand into helping people administer estates for their loved ones, we are confronting many questions from clients. Individuals that are grieving and coping with the death of a loved one are often overwhelmed with the extra burden of ensuring that the assets of their dearly departed are properly managed and distributed to the rightful beneficiaries. Others are concerned that mismanaged estates can lead to costly errors, but at the same time are hesitant to expend estate assets on costly lawyers, accountants, or other fiduciary experts. Here is a quick guide to help explain the process and help clear up some confusion.
Who is responsible for administering an Estate?
If your loved one left a Will or a Trust, they would have designated an Executor or Trustee in their documents as the party responsible for administering their estate. This is usually fairly straightforward – most often a spouse, a child, or a trusted friend. If the named executor is unable to serve, or the decedent did not leave a Will, the Probate Court (in Virginia, a division of the Circuit Court in the County of the decedent’s last residence) will intervene and appoint an Executor. This is typically a close relative and a beneficiary of the estate. In this instance, the court appointed Administrator is typically the first qualified beneficiary that requests the designation from the court.
What are the duties of the Estate Administrator?
The primary duty of the administrator (Executor/Trustee/Fiduciary) is to gather the decedent’s assets and distribute them to the proper beneficiaries. There are many other tasks involved, however! Some of these include arranging burial, cremation and funeral plans according to the decedents wishes, properly probating the Will, serving as Trustee for any testamentary or living trusts, paying off the debts of the estate, paying estate taxes, and filing tax returns for the estate and the decedent.
What is the difference between an Executor, Trustee, Administrator, and Fiduciary?
This is often very confusing, but in the long run, with some nuances, these are all individuals that serve in the same role – the person in charge of administering the estate. An “Executor” is usually associated with a Will and a “Trustee” with a Trust. Once an Executor or Trustee is qualified, they are often referred to as the Estate Administrator. The Probate Court refers to the Estate Administrator as the “Fiduciary,” which means they have certain financial obligations for administering the estate properly, in accordance with the laws, rules, and regulations of the jurisdiction where the estate is being administered.
What is Probate?
Probate is the court supervised process whereby the estate administrator officially offers the decedent’s Will for administration, and seeks to officially qualify the administrator of the estate. If probate is required (more on this below), the proponent of the Will presents it to the court along with an information form, death certificate, inventory of the probate assets and other documents that help establish the nature and content of the decedent’s estate. The Will then becomes part of the public record, and is available for review by beneficiaries and creditors. The administrator of the estate works under the supervision of the Probate Court, and an official known as the “Commissioner of Accounts,” to file the proper paperwork and make a true accounting of the estate. The Administrator will have to post a bond and file paperwork with the Court periodically throughout the process and, once all of the assets have been distributed, to close out the estate.
Do I have to go through Probate? What Assets are subject to Probate?
In Virginia, and most jurisdictions, if the decedent owned any assets subject to probate, they must probate the Will. However, many assets are NOT subject to probate because they pass to the beneficiary outside of the Will. Some common assets that are not subject to probate include Real Estate (if the deed passes the property automatically to a survivor), assets held in a Trust, and “Transfer on Death Assets (TOD).” TOD assets are those that pass automatically to beneficiaries through a “beneficiary designation” form, such as retirement accounts, life insurance policies and brokerage accounts. Many people engage in strategic estate planning to ensure all of their assets pass to their beneficiaries through a living trust and TOD provisions, thus avoiding the probate process altogether. But be careful – just because the decedent has a living trust, does not mean all of their assets are owned by the trust. In this case, probate is often required, despite the existence of the trust.
How do I get started?
Once you are ready to begin the process of administering your loved one’s estate, the first step is to locate any Wills, Trusts, or related estate planning documents and carefully read them. The contents of these documents will serve as your guidance, and often contain specific instructions on how the estate should be handled. Next, consult with the guidance and resources offered by the State or County the estate is being administered in. The Virginia publishes and excellent resource: A GUIDE TO THE ADMINISTRATION OF DECEDENTS’ ESTATES IN VIRGINIA which can be found at: https://www.vba.org/page/guide_estates
Next, contact the Probate Clerk in the County Circuit Court where the decedent last resided. Let them know you are initiating the administration of an estate, and ask them what information is needed to establish a qualification appointment. I have found the clerks to be very helpful in guiding administrators through the process.
Do I need a lawyer, accountant or professional estate administrator to help?
It depends. Many people are able to successfully administer estates without professional assistance, particularly if the estate is straightforward, not too complex, and the beneficiaries are all on the same page. However, some people feel more comfortable engaging the assistance of a qualified professional to guide them through the process. If the estate is large, complex, or if you are simply confused, hiring an estate planning professional to help guide you through the process, save you a lot of time and headaches, and help ensure that costly mistakes are not made. Some of my clients hire me to help provide some guidance along the way, while others are more comfortable having our firm manage the entire process on their behalf. I always recommend administrators consider engaging a C.P.A. to help manage the necessary tax filings. It’s important to note that professional fees related to the administration process are expenses of the estate, and can be paid directly from the estate’s assets. They are not “out-of-pocket” expenses for the administrator.