One Man's Junk - The Inventory and Appraisal Requirement
Volume 5 • Issue 6 • June 2015
The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. In this month’s issue, we will look at the duty to inventory and appraise the assets of an estate. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.
A recent story making the rounds on the internet involved a woman discarding a rare Apple 1 computer worth $200,000.00 at a California recycling facility. The woman apparently dropped off the computer along with several boxes of electronic “junk” she cleaned out of the garage following her husband’s death. This story highlights one of the problems faced in administering an estate – creating an inventory and appraisal of estate assets.
Marshalling the Assets
Whether you are named as the successor trustee of a trust or the personal representative (executor) of an estate, you will have a number of duties prescribed by law and by the trust agreement. As a trustee or executor you are a fiduciary for the beneficiaries of the trust or estate. One of the most important initial duties is the duty to take control of estate and/or trust assets. This means gaining physical control where possible, such as in the case of tangible personal property. This process, known as marshalling the assets, is unique to each estate. Some of the matters to be considered are as follows:
Inventory safety deposit boxes;
Obtain date of death balance of bank accounts;
Determine and collect employee, social security, and veteran death benefits;
Obtain title to vehicles;
Obtain original of each insurance policy and file claim for each life insurance policy;
Obtain copies of securities;
Obtain statement from brokerage account;
Determine as of date death whether there are dividends declared but unpaid on any stock;
Obtain bond instruments;
Obtain note on any debts owed to Decedent and notify debtor of Decedent’s death and of any change in the place and method of making payments on the note;
Obtain all governing documents, buy-sell agreements, shareholders agreements, tax returns and other relevant documents on closely held business interests.
Preservation of Assets
Once in control of the property, a duty exists to use reasonable care and skill to preserve the trust and/or estate property. Trust and/or estate property must be protected from being lost or stolen. Insurance should be maintained. Mortgages and utilities should be kept current. If there is a residence that will be unoccupied, make certain it is kept locked and take appropriate precautions to avoid burglary or vandalism. Motor vehicles should also be secured and kept in running condition. If there is a business, arrangements should be made to operate the business (at least temporarily).
Duty to Inventory and Appraise
Once in control of the property, a trustee or personal representative should create a complete inventory of the property. States that have adopted some form of the Uniform Probate Code generally require that an inventory be prepared listing each asset in reasonable detail along with its fair market value on the date of death and any encumbrances. This inventory should be supplemented as new information becomes available. While in certain instances the opinion of the trustee or personal representative may be sufficient to establish value, in other situations the services of a professional appraiser should be obtained. Examples of these situations could include:
When there are distributions in kind
If there are potential estate tax ramifications
To establish a new basis for income tax purposes
Only when all of the assets and the values of those assets are known can a trustee or personal representative make the important decisions concerning taxes, payment of creditors and ultimately distribution to beneficiaries. Accepting the responsibility of being a trustee of a trust or the personal representative of an estate can be a time consuming and difficult job. It is also a job that carries significant risk of liability. If you have been named as the trustee or personal representative, it is important to seek competent professional advice in fulfilling your legal duties.
This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.