What Is Included in an Estate Inventory?

The executor’s job includes gathering all of the assets, determining the value and ownership of real estate, securities, bank accounts and any other assets and filing a formal inventory with the probate court. Every state has its own rules, forms and deadline for the process, says a recent article from yahoo! Finance titled “What Do I Need to Do to Prepare an Estate Inventory for Probate,” which recommends contacting a local estate planning attorney to get it right.

The inventory is used to determine the overall value of the estate. It’s also used to determine whether the estate is solvent, when compared to any claims of creditors for taxes, mortgages, or other debts. The inventory will also be used to calculate any estate or inheritance taxes owed by the estate to the state or federal government.

What is an estate asset? Anything anyone owned at the time of their death is the short answer. This includes:

Real estate: houses, condos, apartments, investment properties
Financial accounts: checking, savings, money market accounts
Investments: brokerage accounts, certificates of deposits, stocks, bonds
Retirement accounts: 401(k)s, HSAs, traditional IRAs, Roth IRAs, pensions
Wages: Unpaid wages, unpaid commissions, un-exercised stock options
Insurance policies: life insurance or annuities
Vehicles: cars, trucks, motorcycles, boats
Business interests: any business holdings or partnerships
Debts/judgments: any personal loans to people or money received through court judgments

Preparing an inventory for probate may take some time. If the decedent hasn’t created an inventory and shared it with the executor, which would be the ideal situation, the executor may spend a great deal of time searching through desk drawers and filing cabinets and going through the mail for paper financial statements, if they exist.

If the estate includes real property owned in several states, this process becomes even more complex, as each state will require a separate probate process.

The court will not accept a simple list of items. For example, an inventory entry for real property will need to include the address, legal description of the property, copy of the deed and a fair market appraisal of the property by a professional appraiser.

Once all the assets are identified, the executor may need to use a state-specific inventory form for probate inventories. When completed, the executor files it with the probate court. An experienced estate planning attorney will be familiar with the process and be able to speed the process along without the learning curve needed by an inexperienced layperson.

Deadlines for filing the inventory also vary by state. Some probate judges may allow extensions, while other may not.

The executor has a fiduciary responsibility to the beneficiaries of the estate to file the inventory without delay. The executor is also responsible for paying off any debts or taxes and overseeing the distribution of any remaining assets to beneficiaries. It’s a large task, and one that will benefit from the help of an experienced estate planning attorney.

Reference: yahoo! finance (Dec. 3, 2022) “What Do I Need to Do to Prepare an Estate Inventory for Probate”

What Assets are Not Considered Part of an Estate?

In many families, more assets pass outside the Last Will than through the Last Will. Think about non-probate assets: life insurance proceeds, investment accounts, jointly titled real estate assets, assuming they were titled as joint tenants with right of survivorship, and the like. These often add up to considerable sums, often more than the probate estate.

This is why a recent article from The Mercury titled “Planning Ahead: Pay attention to your non-probate assets” strongly urges readers to pay close attention to accounts transferred by beneficiary.

Most retirement accounts like IRAs, 401(k)s, 403(b)s and others pass by beneficiary designation and not through the Last Will. Banks and investment accounts designated as Payable on Death (POD) or Transfer on Death (TOD) also do not pass through probate, but to the other person named on the account. Any property owned by a trust does not go through probate, one of the reasons it is placed in the trust.

Why is it important to know whether assets pass through probate or by beneficiary designation? Here’s an example. A man was promised half of this father’s estate. His dad had remarried, and the son didn’t know what estate plans had been made, if any, with the new spouse. When the father passed, the man received a single check for several thousand dollars. He knew his father’s estate was worth considerably more.

What is most likely to have happened is simple. The father probably retitled the house with his new spouse as tenants by the entireties–making it a non-probate asset. He probably retitled bank accounts with his new spouse. And if the father had a new Last Will created, he likely gave 50% to the son and 50% to the new spouse. The father’s car may have been the only asset not jointly owned with his new spouse.

A parent can also accidentally disinherit an heir, if all of their non-probate assets are in one child’s name and no provision for the non-probate assets has been made for any other children. An estate planning attorney can work with the parents to find a way to make inheritances equal, if the intention is for all of the children to receive an equal share. One way to accomplish this would be to give the other children a larger share of probated assets.

Any division of inheritance should bear in mind the tax liability of assets. Non-probate does not always mean non-taxed. Depending upon the state of residence for the decedent and the heirs, there may be estate or inheritance tax on the assets.

Placing assets in an irrevocable trust is a commonly used estate planning method to ensure inheritances are received by the intended parties. The trust allows you to give very specific instructions about who gets what. Assets in the trust are outside of the probate estate, since the trust is not owned by the grantor.

Your estate planning attorney will be able to review probate and non-probate assets to determine the best way to achieve your wishes for your distribution of assets.

Reference: The Mercury (April 12, 2022) “Planning Ahead: Pay attention to your non-probate assets”

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