What is Probate?
You may have heard horror stories about the mysterious process called "Probate." Probate is the process of "administering" and distributing a deceased person's assets. Probate includes recording the will in the records of the Clerk's Office, and usually includes appointing an executor, who is supervised by the court in the administration and distribution of the estate. In Virginia, this process is supervised through Commissioners of Accounts, and usually takes about a year. In many cases, it is desirable to avoid some of the procedures and costs of probate. But despite these horror stories, probate in Virginia is neither an excessively burdensome nor a costly process, and need not be feared.
What Property is Subject to the Probate Process?
The probate estate includes the assets (real property and personal property) which were held in the decedent's name at death, and those which pass under the will. This excludestwo general categories of assets: jointly-owned property, and assets payable pursuant to a contract.
Real property which you own with another person is typically owned either as "tenants in common" or as "joint with right of survivorship." Husband and wife can also own property as "tenants by the entirety." Any interest you own as "tenants in common" can be transferred by your will to your designated beneficiary. "Joint with survivorship" and "tenants by the entirety" property interests, however, pass directly to the survivor or survivors upon death, by operation of law. When you initially acquire and take title to the real property, you are defining the rights and creating this ultimate effect.
Personal property is also sometimes held in the same way. When you create a joint bank account, payable on death account, joint certificate of deposit, or similar type of account or investment, you are also defining the rights and creating an automatic transfer on death. These are pursuant to the documents you sign with the bank or other party, which constitute a contract. On your death, the bank must pay according to the contract, which you cannot change by making an alternate disposition in your will. Retirement plan assets and property held in trust also escape probate, for the same reasons.
A life insurance contract is another type of contract. The proceeds of the contract are paid to the beneficiary designated by the owner of the contract. If the beneficiary is the estate of the decedent, then the proceeds will be included in the probate process. If the decedent owned the policy on the life of another person, then it will also be a part of the probate estate.
Real estate (which is not held jointly) passes directly to the beneficiaries named in the will, and is not part of the probate estate in Virginia unless the will authorizes the executor to sell it. It is important to note that some of these items which are not part of the probate estate are counted as part of the taxable estate for Federal estate tax purposes.
How is the Probate Process Started?
The process is started by making an appointment with the probate clerk of the Circuit Court, usually where the decedent last owned property and lived. The original will and death certificate, along with other information to be provided on the Court's forms, are filed with the Clerk by "an interested party" – typically the executor named in the will. The executor named in the will is then appointed by the Clerk, and his or her official authority begins. The estate is assigned to a Commissioner of Accounts, who is charged with overseeing the estate administration.
The Executor must also provide the Clerk with a list of the decedent's heirs, and must mail notice to each heir and each beneficiary named in the will within 30 days after appointment, informing them of the death and of the executor's appointment.
Most wills today include a "self-proving affidavit," which means the signatures of the testator and witnesses have been properly notarized. If the will is not self-proving, one of the witnesses will be required to appear and testify under oath as to the signature of the decedent. Unless waived in the will, the executor will also be required to post a commercial surety bond to secure his or her obligation to properly execute the terms of the will. Even if surety is waived, if no executor or co-executor is a Virginia resident, the non-resident(s) must either post the bond or appoint a Virginia resident to serve with them.
In the event there was no will, a surviving spouse or heir will usually qualify as Administrator, to fulfill the same functions as an Executor.
What is the Probate Tax?
The probate tax rate in Virginia is $1.33 per $1,000 of value of probate property. Upon probate of the will, the Clerk will collect this tax, which is imposed on the value of all real and tangible property located in Virginia, as well as all intangible property wherever located. Examples of property not included in the valuation of the estate for probate tax purposes include:
- Property held jointly with right of survivorship.
- Insurance proceeds, unless payable to the estate.
- Property that passes by inter vivos trust.
- Property passing through the exercise of a power of appointment.
- Bonds payable on death to a named beneficiary.
What is the executor's responsibility?
The executor is responsible for collecting and protecting the probate property, for paying all debts of the estate, and for making distribution of the assets in accordance with the provisions of the will. Within four months of his or her appointment, the executor must file with the Commissioner of Accounts a detailed list, known as an "inventory," of the probate property, including the value of each item. Within sixteen months from appointment, the executor must file an accounting with the Commissioner, showing the income and expenditures of the estate administration. The final accounting shows the distributions to the beneficiaries named in the will.
The executor is also responsible for the filing of the decedent's final income tax return, as well as an income tax return for the estate if the estate earns more than $600 of taxable income in a year. If the value of the decedent's taxable estate exceeds $3,500,000, the executor must also file an estate tax return within nine months of the date of death, even if no estate tax is owed.