When someone passes away, it may be necessary for their estate to go through probate. This is a court-supervised process in which someone’s estate is settled, outstanding debts are paid and assets are distributed to the deceased person’s heirs. An executor is charged with being the individual who oversees the probate process. One of the most important tasks on an executor’s checklist is submitting a detailed inventory of the estate to the probate court. Knowing what’s included in an estate inventory can make the probate process easier to navigate. For help with estate planning, consider speaking with a financial advisor about your situation.
What Does Inventory Mean in Probate?
Inventory in probate means much the same thing as it does in any other context. It’s a thorough listing of a decedent’s assets. So why is this important to have?
During probate, the executor is charged with several duties, including:
- Collecting assets
- Accurately estimating the fair market value of all assets in the estate
- Determining the ownership status of each asset
- Liquidating assets to pay off outstanding debts, if necessary
The estate inventory is central to this process. The probate court will need to see an inventory of the estate’s assets before distributing those assets to the deceased person’s heirs. Distributions can follow the specific behests laid out in a will. In the case of someone who dies intestate, assets are distributed according to state inheritance laws.
Establishing accurate asset valuations is also important because of the tax implications that may be involved. An executor may work with a tax professional or estate planning attorney to determine how much each asset is worth in order to maximize tax savings to the estate.
What’s Included in an Estate Inventory?
In simple terms, an estate inventory includes all of the assets of an estate belonging to someone who’s passed away. This inventory can also include a listing of the person’s liabilities or debts.
In terms of assets, items that would need to be added to an estate inventory include:
- Bank accounts, including checking accounts, savings accounts, money market accounts and CDs
- Personal investment accounts, including brokerage accounts, margin accounts, individual retirement accounts (IRAs), health savings accounts (HSAs) and college savings accounts
- Business interests, including partnerships, corporations, limited liability companies (LLCs) and sole proprietorships
- Real estate, including personal residences and investment properties
- Pension plans and workplace retirement accounts, such as 401(k)s, 403(b)s and 457 plans
- Insurance policies, including life insurance, disability insurance, annuities and long-term care insurance
- Intellectual property, such as copyrights, trademarks and patents
- Household items
- Personal effects, which can include heirlooms, antiques and collectibles
Some of these assets are subject to probate, while others may not be. For each of these assets, the executor would need to determine the current fair market value, ownership status and whether any beneficiaries have already been named. In most instances, a beneficiary designation takes precedence over any designations made in a will or under state inheritance laws when someone dies intestate.
Here’s what’s included in an estate inventory on the liabilities side:
- First and second mortgage loans associated with any real estate included in assets
- Outstanding personal loans
- Private student loans
- Vehicle loans associated with a vehicle included on the asset side of the inventory
- Credit cards and open lines of credit
- Business loans
- Unpaid medical bills
- Unpaid taxes
- Any other outstanding debts, including unpaid court judgments
When inventorying debts, the executor would need to note who the debt is owed to, the current balance and whether any collateral was used to secure the loan or line of credit.
Generally, no asset or liability is too small to be included in the estate inventory. And if the executor turns over an inventory to the probate court then discovers additional assets or debts later they’d need to submit an amended list.
How Does an Executor Find Assets to Inventory?
Completing an estate inventory can be one of the most challenging aspects of being the executor of an estate. If someone has named you as executor of their asset, here are some of the options you may have for identifying assets:
- The deceased person’s will if they have one
- Financial statements or legal documents the deceased person leaves behind
- Recent tax returns for the person who’s passed away
- Life insurance search registries
- Retirement benefit search registries
- Abandoned asset databases
- Public property records search
You may also be able to find assets for an estate inventory by talking to the deceased person’s financial advisor, estate planning attorney or relatives. It’s important to be as thorough as possible so that the final inventory list submitted to the probate court is accurate and complete.
If you’re planning your estate, you can make this job easier for your executor by creating an estate inventory yourself. You can store a copy of this inventory with a copy of your will if you have one in place. And if you have yet to make a will, that’s something you may want to consider doing sooner rather than later. If you were to die without a will in place, your assets would be distributed according to state guidelines, rather than your specific wishes.
How to Build Your Own Estate Inventory
If you’re making an inventory of your estate, you’d want to include the same types of assets that an executor would look for. So, depending on your financial situation, your personal estate inventory might include:
- A 401(k) plan or similar employer-sponsored retirement plan
- One or more IRAs
- Business retirement accounts, such as a solo 401(k) or SEP IRA if you’re self-employed
- One or more taxable brokerage accounts
- A Health Savings Account (HSA)
- College savings accounts
- Life insurance or disability insurance
- Bank accounts
- Vehicles you own
- Real estate and land that you own
- Personal possessions that you estimate are valued at $500 or more
- Family heirlooms, antiques or collectibles
If you’re married, you and your spouse may want to create an estate inventory showing assets you own jointly and separate ones showing assets that you own individually. Remember that assets acquired after marriage are considered to be owned by both spouses if you live in a community property state.
You can also simplify the executor’s job by making a list of any liabilities or debts that you so. This can include a mortgage on your home, car loans, private student loans, credit cards, installment loans, business loans, tax liens, medical bills and personal loans. Once you complete your personal estate inventory you may want to file a copy of it with your estate planning attorney or financial advisor. It may be a good idea to review your inventory annually just to ensure that it’s up to date.
Understanding what is included in an estate inventory can make your job as an executor easier. If you submit an incomplete inventory, that could cause snags in the probate process, which can delay the distribution of assets to someone’s heirs. It can also be helpful to know what to put into an inventory when drafting your own will as part of your estate plan.
Estate Planning Tips
- Consider talking to a financial advisor about where an estate inventory fits in your estate plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Trusts generally do not need to be included in an estate inventory because they’re not subject to the probate process. So any assets that are held in a trust wouldn’t have to go through probate first before they could be distributed to your beneficiaries. If you have a sizable estate, it may be worthwhile to consider establishing a trust to ensure a smooth transition of assets. It’s also important to note that assets with a designated beneficiary or those jointly owned with someone else may not have to go through probate either.
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