226 Main Street, Poultney, VT 05764 Main Number: (802) 287-9110
LAWYERS SERVING RUTLAND, BENNINGTON AND ADDISON COUNTIES IN VERMONT.
In Vermont, the administration of a decedent's estate comes under the jurisdiction of the Probate Court. The court oversees the probate proceeding in order to ensure that the assets of the decedent are managed and distributed in accordance with Vermont law and the directions of the decedent.
There are specific statutes and rules that must be followed by any fiduciary who is appointed to administer an estate. Many of these provisions will be referenced in the sections that follow. Although the information in this pamphlet is based on Vermont law in effect at the time of publication, the statutes and rules themselves are the final, definitive authority if there is any question.
While this manual is intended to help guide you through the probate procedure, it covers only the basics. It may not explain the specific circumstances that arise in each estate. Although a fiduciary may administer the estate without being represented by a lawyer, if you, as a fiduciary, are unsure of the legal or financial implications of any aspect of a probate proceeding, you should consult an attorney or an accountant.
1. This pamphlet cannot answer all of the questions that might arise during the administration of a decedent's estate. You should consult promptly with an attorney or the court when you are in doubt as to the correct way to proceed. The court will try to be helpful, but cannot give you legal advice. Seeking proper advice before you act may help you to avoid costly errors.
2. Do not pay any bills of the estate if you have any reason to feel that there are not sufficient assets in the estate to pay all bills in full. in cases where there are insufficient assets to pay everyone in full, the law specifically sets out the order of payment of the bills. If you pay them improperly, you may be personally liable to any creditor who is hurt by your action. If you have any doubts, do not pay the bills until you are sure you know all of the assets and all of the bills.
GENERAL OVERVIEW OF DUTIES
You, as fiduciary, in a probate proceeding are responsible for the prompt, efficient, and impartial administration of the decedent's estate.
You have important duties to perform. The assets of the estate must be collected and the debts and obligations of the decedent must be paid if there are sufficient assets in the estate. You are required to notify the interested persons of any matters that may affect their interests. There are time limits within which these duties must be performed. While the court personnel may be helpful, remember that it is your responsibility to manage the estate carefully and promptly.
if you do not perform the necessary duties in a competent and timely manner, the court has the authority to remove you and to impose sanctions.
Now that you have been appointed as fiduciary of the estate, you have to take following actions, using the court forms unless the court directs otherwise.
Inventory. You have to identify all of the decedent's assets, and file a report, called an inventory, with the court. Instruction sheets explaining how the assets are to be reported accompany the inventory form. The inventory must be signed and notarized, and filed within 30 days of your appointment. Copies must be sent to all interested persons, by first class mail, whether they have requested notice or not. See also "Real estate description" under PARTICULAR ISSUES.
Your certificate of appointment is proof that you have the authority to obtain the information you need to prepare the inventory. This certificate may be required by banks, investment companies, insurance companies, the decedent's employer, the Social Security Administration, and others. If people do not cooperate with you, you may have to have an attorney or the court assist you.
Do not list assets jointly held with others with rights of survivorship, life insurance policies with a designated beneficiary, Totten trust or beneficiary savings accounts, or any other asset that passes directly to a living owner without probate court action. If you are unclear as to whether an asset needs to be listed, contact your own attorney.
All property should be listed on the inventory at its, fair market value as of the date of death of the decedent. Each titled asset (such as real estate, bank accounts, stock accounts, and motor vehicles) should be itemized separately. Sometimes untitled assets (such as personal effects) can be consolidated.
You sometimes must decide whether to estimate values, calculate them from independent sources, or hire an appraiser. The inventory date-of-death values have important tax implications for the estate and for the beneficiary. Among the situations in which a professional appraisal is particularly recommended are: (a) for specific items going to specific beneficiaries, (b) for assets of great value, (c) for items that must be divided among beneficiaries, and (d) for assets whose value is disputed by the beneficiaries. The court may sometimes order an appraisal on its own motion.
The filing time can be extended up to 90 days from appointment, but only by court permission. If you later find that you omitted assets from the initial inventory, you may file an amended inventory, a supplemental inventory, or include the assets under Schedule E of your next account as "Other estate not in inventory."
Notice to creditors. You must send a creditor's claim form to any creditor known to or reasonably ascertainable by you. You must also publish notice to creditors in the newspaper for two weeks in a row, and provide the court with a copy of the published notice within 10 days after last publication. The notice alerts creditors that if they want to be paid, they must file a claim with the court and with you within four months of the date of the first publication. if they do not do so, their claim may be barred forever.
In cases where you are absolutely sure that you know all of the debts (including Medicaid claims), or you know that there are no debts, you can file a motion asking the court to waive the requirement of publishing the notice to creditors. A copy of the motion must be sent to all interested parties. The court may require a hearing to determine whether the motion should be granted. While waiving the publication can save some money and time, you should be cautious about pursuing it. If there are creditors that you do not know about, failing to publish notice extends the time in which they can file a claim to three years after the death of the decedent. Publishing the notice gives you certainty that four months after the first date of publication you will know all of the outstanding claims.
Generally, unless you are absolutely certain that you will have enough money to pay all claims that are filed; you should not pay any bills until the time for filing claims has expired. If there is not enough money to pay every claim, the law sets up a priority of who should be paid and in what order. if you make a mistake and pay a claim that is not entitled to priority, you may be called upon to personally repay the estate for your mistake. You may seek guidance from an attorney if you are uncertain about priority. The court can issue a formal order, called an order of dividend, to determine priority.
Administration expenses. As long as the estate is open, you will be responsible for preserving the assets of the estate. That may include making arrangements for the safe storage of personal property and keeping buildings and real estate insured. You may have to pay monthly mortgage bills, electric bills, fuel oil bills and the like. These kinds of bills for preserving and maintaining the property are called administration expenses.
You can pay administration expenses even if you do not have enough money to pay creditors' claims because administration expenses have a higher priority than claims of creditors.
Separate bank accounts. You should have a separate checking account for the estate. Estate funds must be kept separate from your own funds and should not be commingled with any other funds. You must keep exact and careful records of all money coming into and going out of the estate.
Licenses to sell, etc. If you determine that it is necessary or in the best interest of the estate and beneficiaries to sell real estate, or personal property, or to convey, mortgage or lease real estate or personal property, you must file a motion for a license with the court, after the inventory has been filed.
Personal property includes not only tangible personal property, like tools, equipment, furnishings, and vehicles, but intangible personal property, like stocks and bonds.
As a matter of sound planning, you may review your inventory and seek a license to sell all items that might be sold during the administration of the estate, even if you do not have immediate marketing plans.
All the property must be carefully described, but particularly the real estate. See "Real estate description" under PARTICULAR ISSUES.
The court will schedule a hearing and provide for notice to all interested parties. If the fiduciary files with the court the written consents of all the heirs, then the hearing may be waived. Consents will usually expedite the issuance of a license to sell.
If the motion is granted, the court will issue the license. A certified copy of the license to sell real estate needs to be recorded in the land records of the town where the property to be sold is situated.
The court may increase the amount of your bond prior to issuing the license, because, after the sale, you will be managing more liquid assets than you were previously.
Within 30 days after the sale or conveyance, you must file a report of sale with the court. You also must report the sale in your interim or final account.
Purchasing assets for the estate. As you are responsible for conserving the assets of the estate, purchase of new assets should not be undertaken without prior permission of the court.
Spousal rights. A surviving spouse has certain rights that take priority over the rights of heirs at law and beneficiaries. Within 30 days of your appointment, the surviving spouse must be provided with notice of these rights by either you or the court. The surviving spouse must elect to take any spousal rights within 8 months of your appointment. The election must be in writing and filed with the court. The following is a list of the possible elections:
Personal estate: A surviving spouse may claim a minimum one-third share of the decedent's personal estate.
Household furnishings: A surviving spouse can seek assignment of household furnishings.
Real Estate: a. homestead - A surviving spouse may claim equity in the dwelling and land that the surviving spouse occupied with the deceased spouse up to a certain amount that is currently $75,000. other real estate (dower/curtesy) - A spouse can take a one-third share of the decedent's real estate other than the homestead.
Spousal and family allowance: A surviving spouse may ask the fiduciary for support for the surviving spouse and minor children.
Rights of surviving spouse when decedent has no descendants: A surviving spouse whose deceased spouse did not have descendants and who waives provisions under the decedent's will, can take the decedent's entire estate up to $25,000 and half the remainder. The remaining half of the estate shall pass as if the spouse had not survived.
Filing accounts. You must file a final account of your administration when the estate is ready for a final decree of distribution from the court.
You also may have to file an interim .account. Annual interim accounts are required if the estate takes more than a year to settle. In addition, an interim account may be requested by the court at any time.
The account must be filed on the forms provided by the court. The court has two alternative sets of accounting forms.
While the account forms are largely self-explanatory, it may be helpful to think of the account as a pipeline, or assembly line. At the beginning of the line, you report the value of the assets you began with, the real and personal property values from your inventory or last account. You then report what you have added in value and what you have taken away. Finally, you report what remains at the end of the accounting period. "Schedule" is the court's term for the attached sheets on which you itemize, or otherwise explain, the figures on your account summary.
Do not report the changing values of assets that remain in the estate and undergo fluctuating market values or depreciation. Those assets remain in your accounting at their original inventory values, until or unless they are sold. Upon sale, you then report either the resulting loss, or gain.
Fiduciary's fees and attorney's fees. Attorney's and fiduciary's fees should be presented in detail (date, activity, time spent). They cannot be paid unless they are allowed by the court. The fees must be reviewed by the court for reasonableness. The court will use the factors listed in the Vermont Rules of Professional Conduct Rule 1.5(a). Those factors include, among others, time and labor required, and experience of the attorney or fiduciary. Generally, fiduciary and attorney fees may not be claimed on a federal or Vermont tax return until they are approved by the court and actually paid.
Taxes. You are responsible for filing all tax forms. These may include the decedent's final state and federal income tax returns, and possibly a fiduciary income tax return for the estate, and an estate tax return.
The decedent's tax year ends with the date of the decedent's death. Income through that date must be reported in federal and state individual tax returns. If the decedent was married at the time of death, it is possible for the surviving spouse to file a joint return for the year.
The estate becomes responsible for reporting all income that is generated after the death of the
decedent, including the filing of any federal and state fiduciary income tax returns. If you are unsure about the income tax liability of the decedent or the estate, you should consult an attorney, accountant, or other tax preparer.
COMPLETING AND CLOSING THE ESTATE, for estate tax returns and Vermont Department of Taxes tax clearance.
In order to obtain a final decree of distribution from the court, you must provide an approved final account, and obtain a tax clearance from the Vermont Department of Taxes. The final steps in the estate are as follows:
1. Final accounting. Prepare a final account. In addition to all income and expenses for the accounting period, the account must show, on schedules 15 and 16, all assets remaining to be distributed. In addition, the accounting must show, on schedule 17, how you wish those assets to be distributed.
a. Attorneys' fees and fiduciary's fees are specially treated in the final account. As noted above, they cannot be paid until they have been approved and allowed by the court. At the same you need to show them as if paid, so that Schedules 15, 16, and 17 can accurately reflect the balance remaining to be distributed to the heirs. To meet these competing goals, include the unpaid attorneys fees and fiduciary fees in Schedules 11 and 12 as if paid, but flag them with an asterisk or other notation and indicate "To be paid when account is allowed." Any other postponed payment, such as a tax preparer's fee for preparing final returns after distribution, may be flagged in the same manner.
b. The final account and notice of hearing on the account must be sent by first class mail to all beneficiaries and to any others who have entered an appearance. The notice must state whether a decree of distribution will be issued following allowance of the account by the court. The notice must state that a written objection must be filed with the court three days before the hearing. A certificate of service must be filed with the account to prove service has occurred. Alternately, you may file the account with consents from the beneficiaries and any others who have entered an appearance. The court may then waive a hearing and issue the decree.
2. Tax Clearance. You must file all necessary tax forms. A Vermont Estate Tax Information and Application for Tax Clearance must be filed with the Vermont Department of Taxes. The form is available from the court. A tax clearance must be issued by the Vermont Tax Department before the court can issue a final decree.
NOTE: You are also responsible for filing any other necessary tax forms, which may include final state and federal income tax returns and fiduciary income tax returns. You need to determine whether a federal estate tax return (IRS Form 706) must be filed. It will be necessary to consult an attorney or accountant to determine what forms must be filed. Deadlines must be met to avoid penalties. Do not delay obtaining professional advice.
3. Final Decree. After the final account has been allowed and a tax clearance has been received, the court will issue a final decree, which directs the fiduciary to distribute remaining funds. FUNDS MAY NOT BE DISTRIBUTED UNTIL A DECREE HAS ISSUED.
Once the decree or order of dividend is issued, interested parties have 30 days to appeal the order. When that time has passed with no appeal, you can distribute the assets according to the court order. Some fiduciaries carry out distribution before the 30 days is up, if they believe the possibility of an appeal is remote. However, they need to understand that they distribute at their own risk if they do so during the appeal period. Another alternative is for the beneficiaries to waive the appeal period in writing.
4. Distribution. Distribution should be carried out promptly. In connection with the distribution:
a. You will be seeking a probate receipt from each beneficiary. If you anticipate difficulty persuading any of the beneficiaries to sign and return the receipts, it may be worthwhile to include stamped-self-addressed envelopes with the receipt form.
b. If the estate will be preparing a final fiduciary income tax return, with the tax consequences passed to the beneficiaries, the tax preparer will want federal identification (or social security) numbers for the beneficiaries. These should be solicited in connection with the receipts, unless they have previously been obtained.
c. If real estate is being decreed, you will need a certified copy of the decree (rather than a conformed copy) from the court, and the certified decree will need to be recorded at the town clerk's office of the town where the property is located accompanied by a Vermont Property Transfer Tax Return. The Transfer Tax Return is not a probate form. It may be obtained from the Vermont Department of Taxes, or from a town clerk, may require the assistance of an attorney to complete, and should be signed by both the fiduciary and the beneficiary.
In connection with real estate, the court will require not only the receipt but also the recording information, the book and page of the town land records where the decree was recorded. This may be provided on the receipt, or by way of a copy of the recorded decree that incorporates the recording information.
5. Closing report and discharge. Upon completion of distribution, you will file a closing report, with the beneficiaries' signed receipts attached. [Note: Up to a year is permitted by statute unless the court requires an earlier filing.] If all is in order, the court will sign and return to you an approved copy of the closing report. It will also provide you with a discharge of surety if your bond had corporate or personal sureties.
At this point, you are discharged of your duties, and you have no further power to act. If additional assets are found later, the estate will need to be formally reopened.
P.S. LAWYERS IN OUR OFFICE ALSO PROBATE ESTATES IN NEW YORK