What is a Preliminary Inventory? (Part I)

Video

Good morning. It’s Andy Stautz at Stautz law. It’s casual Friday here again. Recording another talk just after the last one and it is still 95°. Today we are talking about preliminary inventories, which is an important first step in administering a probate estate.  

To begin with the Personal representative is the person in charge of administering a deceased person’s estate. The decedent’s estate is all of their property. All of their property, I should say, that is titled solely in their name at time of death. We’ve discussed earlier and elsewhere the difference between probate and non probate assets.  

The First “Preliminary Inventory”: Applying to be Appointed Personal Representative

But here’s the situation. And here’s where the preliminary inventory comes up first: when you file your application– your petition to be appointed personal representative. On the filing, there’s a section where you say, you know, you say this is my name. Here’s why I’m suited to be a personal representative. There’s also, we think the estate is solvent. You know more assets than liabilities, more positives than negatives, if that’s true, and then you also say, here’s a preliminary inventory, just like a very preliminary like, here’s what we think we’re dealing with here.  

So that’s the first, most informal preliminary inventory. And sometimes I leave those blank. Sometimes, you know, I’m preparing the petition for my clients and I say we don’t know “to be determined.” Other times, especially if there’s a question of the court ordering a bond, like we talked about last week, I’ll say the only thing in this estate is this little house and a small bank account. Because if you can reassure the court that the estate isn’t that big, they’re more likely not to order a bond. We talked about that the other week.

So sometimes you put something there, sometimes you say yet to be determined.

The Real Preliminary Inventory: A Starting Point for Administration

The real preliminary inventory has to be filed soon after the court appoints the personal representative, and the letters of administration or the letters testamentary are issued. So. You know your first step is to figure out what’s out there. What the probate assets are, and the values at the time of death.

Determining Property Values at Date of Death

So. For some things, that’s easy. You know, if there’s a bank account, you look back at the statements and you say, OK, well, it was, you know, there’s this much.  

For some things like a house, it’s a little harder. It’s like, well, it’s assessed at this; Zillow says this. 

But you’re supposed to go through all of it and personal property, too. Furniture. You know furniture, $1000, bank account, $30,000, house 140,000.  

Preliminary Inventory as the basis for closing statement

So the preliminary inventory is your master list. This is. Here’s what we started with. And it’s important to get it right, because later when you go to close the estate, supervised or not, you need to tell the court, you know, here’s what happened to the stuff. Here’s where everything went. You know, we paid out this much in creditor claims. We had this much expenses for taxes and attorney fees. We distributed the remainder like, you know.  

You have to account for every dollar and the preliminary inventory is your starting point.  

So it makes sense when you think about it that way. It’s like, OK, we need to set the start. So that we can track it over the administration of the estate and then we can account for it all at the end.  

How precise do property values need to be in a preliminary inventory?

A common question I get though is wait a minute, you know? There’s one beneficiary here. Do we need to appraise the house? Like, do we need to go get a professional appraiser? Or two beneficiaries and they get along and they say, you know, do we really need to know what the furniture’s worth?  

And the answer there is not really. I mean, it’s OK. If there’s going to be a conflict. You want precise values. But otherwise it’s OK to use. To use an estimate for some of those. Less if it’s less contentious and less important. You know, nobody’s going to tell you. Yeah, spend $1000 to get a professional appraiser’s opinion of the clothes, which together are, you know, less than $1000. It just doesn’t make sense.  

So sometimes estimates are OK and sometimes saying, you know. Our realtor tells us we could probably sell the house for this, you know. You need some basis for the valuation, and if it’s a supervised estate, the court needs to approve it. But you don’t necessarily need to go like you know to the penny. This is what we’d get at auction. So that’s kind of… there’s kind of realism there. You know, you need to use some judgment in terms of. How precisely you need to pin down those values.  

But like I said, you need to account for everything at the end, so you can’t. UM. You know, you’re kind of stuck with what you started with. You don’t want to suddenly change your mind about the value of different items.  

Finding All Probate Property

You just don’t want to miss items, so some of it’s Detective work. You know you’re supposed to go through the decedent’s files and say, OK, well, here’s what we think they owned. You look at the tax returns. Oh, they got interest income from this. We didn’t know about that. You know, you got to go find things. And you’ve got a pretty quick time to do it. 

To be continued…

We’ll talk more. This video is getting long, so I’ll talk more about the verification of the inventory in the next video. Thanks for watching and bye for now.