TRACKING THE MONEY – INVENTORY AND ACCOUNTING – PART 2
As noted in Part 1, the Inventory or Inventory Report is the baseline for determining taxes and certain other financial issues with regard to the estate. An “Inventory” is used in supervised administration. An Inventory Report is used in independent administration.
§14-1 of the Probate Act contains the requirements for Inventories. (There are no special requirements for Inventory Reports.) An Inventory must be verified and must list all of the real and personal estate which has come to the knowledge of the representative and any cause of action on which the representative has a right to sue. If further assets are discovered, a Supplemental Inventory is to be filed. The Inventory must describe real estate with improvements and encumbrances thereon, state the amount of money on hand, and list all personal estate.
Rule 12.9 of the Rules of the Circuit Court of Cook County sets forth in much greater detail the kind of information that Cook County requires. The Rule states what specific information should be listed with regard to real estate, stocks, bonds, notes, other securities, partnership interests, tangible or intangible property, and causes of action. Inventory items should be numbered consecutively. Once an asset is given a number, it should have the same number in all subsequent accountings. Inventories in supervised decedent’s estates are filed with the Clerk, not with the Judge. Inventories in minor or disabled estates must be presented to the Court for approval. That then gives the Court the opportunity to make sure that the existing surety bonds are adequate. It is good practice to include at the end of the each Inventory and accounting a section showing the total bond necessary, the existing bond(s), and the amount of additional bond necessary or decrease in bond allowable.
In disabled estates, Inventories are also required to list separately “any joint tenancy accounts in which the disabled person has an interest but which would not be subject to administration in a Decedent’s estate, and shall state the nature of the interest.” The Court is specifically authorized to grant relief with regard to such assets by freezing the assets, requiring notice to other interested parties, etc. In general, the goal of the Court is to preserve the joint tenancies and plan of distribution to the greatest extent possible.
Inventories in supervised decedent’s and disabled estates are to be filed within 60 days after the issuance of letters. Interested parties must be afforded a chance to object to all or part of the Inventory if they choose. Inventory Reports in independent estates must be circulated at least 30 days before filing the Final Report. I think it is better practice, however, to do so much earlier in the Probate process.
1. Property that is held “in kind” does not have to be listed in the Inventory with stated money values. It can be shown merely as “held in kind.” If such property at any time is turned into cash or valued for other reasons, that can then be reflected in the appropriate accounting.
2. I think it is good practice to get in writing from every bank, brokerage firm, or other institution holding each asset some documentation of its designation of the value of the asset(s) as of the date of death. For example, some banks will prorate interest to give you an exact date of death value. Others do not consider interest earned until the next interest payment date. I use whatever value the bank or other institution gives me. I also make it a practice to have some documentation of the value of personal property, whether that documentation consists of automobile ads from a newspaper classified section, estimates from an auto dealer, etc.
3. Assets held in kind may still need to be valued for tax purposes even if the value does not have to be stated in the Inventory. You may need to have an appraisal, but you may be able to avoid one. For example, if real estate is sold within a reasonable period after the date of death, that sale price will be considered the date of death value for tax and accounting purposes.
4. Inventories in disabled estates should also include any rights to periodic payments, such as pension and Social Security. Each such right should be given an Inventory item number and should show the item as a continuing right to receive the payments, presently $X per month. By doing so, each such item will also be routinely carried over to each accounting.
© 2001 by Cary A. Lind, all rights reserved