Preparing and filing an estate inventory is an essential duty for the estate’s personal representative (the executor if there is a Will or the administrator if there is no Will). This is set forth in Section 3301 of the Probate, Estates and Fiduciaries Code in the Pennsylvania Consolidated Statutes. How this is done and why it is important need to be understood.
Estate Inventory Collects & Values the Decedent’s Property
Basically, the personal representative, who is in charge of the estate, must file a list of all real and personal property in the estate that is located in Pennsylvania. The property that is included is any property that the decedent owned solely or as a tenant in common. Property owned jointly with survivorship rights as well as property with named beneficiaries and “payable-on-death” accounts do not have to be listed in the estate inventory, although they could be included in a memorandum section in the interest of completeness.
Valuation of these assets is an important task of the personal representative. If you have this responsibility, you need to remember that all property in the estate inventory is valued as of the date of death. How this can be done for different types of assets will be reviewed in more detail, later. The date by which this document must be filed with the Register of Wills can differ based on circumstances, but it usually would be filed no later than the date that the estate’s inheritance tax return is due.
Why is the Estate Inventory Important?
Before looking at approaches to the preparation of the estate inventory, we should address why it is important. Of course, as mentioned earlier, Pennsylvania law names this task as a duty that a personal representative must fulfill so you have to do this because Pennsylvania tells you that you must. However, there are reasons that this duty exists.
One reason is that the estate inventory tells everyone with an interest in the estate all of the assets under the personal representative’s control. You have assumed personal responsibility for the listed assets and can be held liable for mishandling them. Their valuation also is used to determine the filing fee for the opening of the estate, which matters to the Commonwealth. This is why you can underestimate the estate’s value at the beginning when you do not know everything in the estate. When the estate inventory is filed, all assets will be included at their date-of-death values so the filing fee that was unpaid originally can be calculated at this point.
There are other reasons that make the estate inventory important for the personal representative. It can be useful when preparing the inheritance tax return because it includes assets and related information about those assets that will appear on various schedules of the return.
In addition, property listed in the estate inventory gives you the starting point for the estate accounting. This accounting should be provided at least on an informal basis if the estate is closed with a family settlement agreement. However, for an estate that closes after an estate audit at court, the accounting must be formally submitted to the court and interested parties for review. By having an accurate starting point, you are more likely to survive an audit unscathed.
Have a Plan to Locate & List Assets for the Estate Inventory
When you have a duty to complete, you need a good plan for handling this responsibility. As noted above, the estate inventory lists all real and personal property of the decedent at date-of-death values. There are numerous steps involved as you prepare the finished document.
The personal representative needs to find all the personal items, money and similar assets (such as bank accounts, stocks, and money-market funds), and real estate owned without any survivorship rights by the decedent. After identifying this property, you then have to value it. Generally, you can value the items without an appraisal. However, expensive personal property (which could include jewelry and art collections) and real estate (when located in Pennsylvania) will require a professional appraisal.
Detailed descriptions are important, especially with more valuable property. Real estate should be described well enough to be identified by someone looking at the estate inventory. Therefore, you should include its full address.
The type of property may lead to some less-than-obvious considerations. For example, financial accounts may involve a right to interest or dividends that are owed but not yet paid. These rights – if they exist at death – are estate property and must be listed in the estate inventory. A personal representative can work with the financial institutions to obtain theses values. Also, you could find previously unknown assets being held by Pennsylvania’s Bureau of Unclaimed Property.
When you begin to prepare the estate inventory, you probably would be wise to start with a more comprehensive list of property that then is grouped into categories, such as “household furnishings” or “wearing apparel,” before you file the document. Although it may not be filed, the more comprehensive list is useful for the personal representative tracking what becomes of the estate’s property.
Listings in an Estate Inventory: Categories v. Items
Household items and furnishings often are the most common estate items. Because they tend to have relatively small values, you could consider grouping them into categories. As an example, you probably would not produce a list of furniture that includes “sofa, $100; chair, $5”; and so forth. Instead, you would list “household furnishings,” encompassing items similar enough to be placed in a group. This is even more appropriate with small goods of minimal values falling within specific groups, such as “100 hardcover books,” “150 paperback books,” and “kitchen appliances.”
Remember that the items placed in a category with a blanket value are common items with nominal individual values. When the value of personal property is higher (e.g., something worth $3000), you would itemize it in the estate inventory. This would be true of jewelry. You might have a single category for costume jewelry, but you would itemize more expensive jewelry with their individual values and descriptions (stone type, carat weight, etc.).
Financial assets were mentioned earlier when looking at estate property that might be overlooked, such as accrued interest or dividends. All of the decedent’s financial assets are part of the estate inventory, though. You would include cash in the deceased person’s possession and bank accounts (with date-of-death balances). Also look for uncashed checks, balances of loans made to others, Certificates of Deposit, and similar financial assets. With financial accounts, you should include individual account types and numbers in the estate inventory.
Investments must be documented and valued. Among these are 401(k) accounts, IRAs, pensions and retirement savings, stocks, bonds, mutual funds, and annuities. Additionally, a personal representative must identify and list impending court awards that the estate will receive. Life insurance without a beneficiary also is in the estate, although it is not subject to inheritance tax.
Some Valuation Sources for the Estate Inventory
If the decedent owned motor vehicles, boats, or any other vehicles, the personal representative generally can use sources such as the Kelley Blue Book (https://www.kbb.com/) for a reasonable valuation. When listing these, you should include the make, model, and year for these vehicles.
The personal representative is responsible for locating any safe deposit boxes. Once located, they can be accessed by following the process detailed in Pennsylvania. Once you have permission, you need to include the number for the safe deposit box, where it is located, and the contents within the box.
Finding assets and then valuing them can be difficult at times. Financial assets may be difficult to identify at times, but the personal representative should review any personal income tax returns for the last 3 to 5 years for clues. Financial assets are not as difficult to value as they might be to find because there are public sources for such property as stocks and bonds. You would have to do some research to obtain the date-of-death values, but the information is not difficult to access. For other financial assets, you might have financial statements to use, or you could requests valuations from the financial institutions when necessary.
Valuation of Common Personal Items in an Estate Inventory
Personal property for which the title does not have to be transferred to the estate can seem to be difficult to value. Furniture, appliances, and clothing are notable examples. However, a personal representative seeking assistance with valuation for the estate inventory can find guides.
Establishing how much silverware, clothing, and small kitchen appliances are worth can be accomplished by using sources that provide estimates. For instance, you could use the Valuation Guide for Goodwill Donors, a similar source, for a starting point.
When an item is more valuable, you might want to turn to other sources that can establish a fair market value to include in the estate inventory. If the property is routinely sold in the marketplace, you could look at several ways to determine the value of single items or collections in this “middle” tier of possessions. One place to start often is eBay ( http://www.ebay.com ). If you are a registered user, you can type in the item that you are researching, and eBay searches for it. The search results are displayed for completed auctions, and you would look at the prices listed in green, which show sales. If the details of the estate item are similar to the details of the sold item, then you have a reference point when completing the estate inventory.
The Estate Inventory – The Effort Will Pay Off in the End
When you have uncovered all real and personal property that can be found and have chosen a reasonable method to obtain the date-of-death valuations, you then can prepare the official estate inventory to be filed with the local Register of Wills. Because it has various uses, the personal representative of an estate must take this task seriously. It is not easy, but it will make other aspects of handling an estate easier and more successful.