Estate and Trust Administration.

Oast & Hook can assist you in navigating the duties and responsibilities you take on as a guardian, agent, executor or trustee ("fiduciary"). We will help you avoid personal liability as a fiduciary that can arise by making an honest mistake with the administration of an estate or trust. Oast & Hook can save you time and money, with our assistance, you can rest assured that you are in compliance with the Prudent Investor Act, the Income and Principal Accounting Act, and that all Federal and State Income, Estate, and Gift Tax returns will be prepared and filed accordingly.

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Proper administration of a decedent's estate involves a variety of steps. When an individual passes away, an executor is typically appointed in a Will to handle the administrative tasks of the estate. In the absence of a Will, known as an intestate estate, an administrator is appointed, however, regardless of title, the personal representative of the estate is legally responsible to ensure that all necessary steps are taken to comply with the laws regarding creditors, taxation, and distribution of assets to beneficiaries.

In Virginia, the executor must initially file the Will for probate...

In Virginia, the executor must initially file the Will for probate with the Circuit Court of the city or county in which the decedent resided at the time of his or her death. After this step is taken, the executor is charged with the responsibilities of opening an estate account from which any claims against the estate are to be paid. The executor must also retitle assets from the decedent's name into the name of the estate. In order to perform these steps, a tax identification number must be acquired because the decedent's social security number becomes invalid at death. In addition, the executor should file forms with the Internal Revenue Service and the Circuit Court to ensure that he or she is not held personally liable for any debts of the estate.

There are three primary taxes which may be levied upon an individual at death: 1) the probate tax, 2) the federal estate tax, and 3) federal and state income taxes. The probate tax will be levied at the time of qualification as executor. Most localities in Virginia charge $1.33 per $1000 of probate estate value. With the passage of recent estate tax legislation, the vast majority of estates in this country escape the federal estate tax. Income taxes, however, must always be addressed by an executor on income generated by estate assets between the date of death and the date of distribution to the beneficiaries. In many cases, the executor takes responsibility for filing the decedent's final personal income tax returns.

Within four months from the date of the executor's qualification, he will submit an inventory of estate assets with the Commissioner of Accounts. This inventory will contain a detailed listing of the decedent's property passing under the Will. The inventory will also contain market values of the assets or property. Some assets are dollar denominated such as bank accounts, stocks or bonds. Other assets will require the executor to have appraisals done to determine the market value as of the decedent's date of death.

In order to properly conclude an estate, an accounting must be filed with the Commissioner of Accounts as well as the beneficiaries. Receipts should be obtained from the beneficiaries wherein they acknowledge receiving their share of the estate, discharge the executor from further obligation to the estate, and accept pro rata responsibility for any proper debts imposed on the estate subsequent to their receiving the distribution.

In many cases, a trust is established either as part of a Will or as a separate document.

The trustee has a very serious responsibility to all beneficiaries of the trust. The trustee is responsible for complying with the Prudent Investor Act. This law requires the trustee to invest trust assets so that they are preserved but also so that they may grow in value for the benefit of the beneficiaries. Non-professional trustees are best advised to delegate this function to professional trustees or trustee advisors.

Another law with which a trustee must comply is the Uniform Principal and Income Act. Under this act, certain items are designated as income and other items are designated as principal. This is extremely important under trust law, as the designations affect distributions to beneficiaries. Periodic accountings and statements must be rendered by the trustee and they must comply with the Uniform Principal and Income Act.

In addition to these two laws, the trustee must file the appropriate tax returns. These include trust or fiduciary federal and state income tax returns, and K-1's, which are given to beneficiaries to assist them in preparing their personal income tax returns.

An executor, an administrator and a trustee have significant personal liability to taxing authorities and to the beneficiaries to perform his tasks proficiently. A good faith effort by the fiduciary to be fair and reasonable will not protect the fiduciary from this liability. Serving in any of these capacities is a complex undertaking, which should not be attempted without professional assistance.