Q: Probate Accounting: How to handle accounting when heirs put money into estate bank account to pay for home rehab?
My mother died last year and my brother and I were the only two heirs named in the will. I am the executor.
The will states that the house is to be sold and proceeds (along with other estate assets) be divided between us.
The issue was the house was very outdated and had bad water intrusion issues in the basement. The cost of fixing the basement and light rehab to update the other areas our Realtor advised ended up costing ~$35k--more than the estate had in cash after all the non-real estate assets were liquidated.
My brother and I each put $12.5k into the rehab, but I deposited it into the estate bank account and paid all rehab bills (many Lowe's trips since we did the work ourselves) from the same account.
I am not sure how to document this for the Probate Accounting Filing. Do I have to account for everything (200+ transactions and receipts needed for each) or can I "back out" the $25k we put in along with $25k of rehab items to balance the account?
A: You would account for that those deposits as loans made by you and your brother to the estate (loan proceeds) and when the estate has the funds to repay them then you would account for those disbursements as loan repayments.
A: As always, my advice is to talk to your probate lawyer to make sure you handle it properly - different areas of Virginia may have different ways of handling it. If you don't have a probate lawyer consult one. If you don't want to do that, you can call the Commissioner of Accounts (COA) for guidance.
In the Virginia accounting methodology, for my clients, I use the 'adjustments' category to show loans to the estate and repayment - it makes it easier for the COA to track when they audit the estate. but ask them first. And yes, for the audit you will need to detail each and every one of the 200+ items.
Also, you may check with the COA and if s/he agrees in advance, if your brother and you sign an affidavit that both of you agree with all steps taken and have divided the estate to your mutual satisfaction, the COA may not make you itemize. But that's not guaranteed.
Again, consult your own lawyer for your specific situation.
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