Drafting an Estate Inventory for Estate Planning or Probate

Estate Planning, Home, Organizing

May 2, 2024

Whether you’re the executor of the decedent’s will or have been tasked with creating estate planning documents, the hardest part is assembling an estate inventory. From identifying all the assets and debts to collecting their details, the task can take months or even years depending on the size of the estate.

If you’re producing an estate inventory for the first time, you need two things—an informative guide and an inventory management system. This article helps you with both. Keep reading to learn all you need to know about drafting an estate inventory and how specialized software can make the process easier.

Let’s go over the basics first.

What Is an Estate Inventory?

An estate inventory, also known as a probate inventory, is a list of all the assets and liabilities owned by an individual at the time of death. The main purpose of creating an estate inventory is to ensure proper estate administration and distribution among descendants, heirs, surviving spouses, named devisees, and creditors. It is also used to calculate the inheritance tax owed by the estate to the state or federal government.

What Is Included in an Estate Inventory?

Real estate, financial assets, retirement accounts, etc. are some common items included in the estate inventory. You may be surprised that pets, books, furniture, machinery, and equipment are also part of an individual’s estate inventory.

Perhaps you’re beginning to understand why estate inventory, planning, and distribution are difficult tasks. But let’s break it down and make it easier. The first step is to categorize assets into tangible and intangible subgroups.

Tangible Assets

Tangible assets typically include all objects that you can see and touch. Here are some examples of tangible assets in an estate inventory:

Homes and real estate
Vehicles
Jewelry
Firearms
Machinery, tools, and equipment
Furniture
Collectibles
Artwork
Pets
Books
Family heirlooms and antiques
Household items with sentimental or monetary value

Intangible Assets

Intangible assets include all those things that cannot be seen or touched. Here are some examples of intangible assets you’ll see in an estate inventory:

Checking and savings accounts
Health savings accounts
Insurance policies
A 401(k) or similar employer-sponsored retirement plan
Retirement accounts
Stocks, bonds, mutual funds
Patents
Intellectual property
Business holdings
Logos and brands

What Are Excluded From an Estate Inventory?

Several assets don’t need to be included in an estate inventory. These are known as non-probate assets. They are typically excluded because they already have a designated beneficiary or are meant for immediate family use.

Non-Probate Assets

Here are some examples of non-probate assets:

Proceeds from life insurance policies
Jointly held property
Assets with pay-on-death designations
Jointly owned bank accounts
Pension plan distributions
Assets held in a revocable living trust
Household goods intended for immediate family (state law applies)
Wages, salary, and commissions owed to the deceased (up to a certain limit)
Vehicles intended for immediate family (state law applies)

While the state governs probate laws, individuals can ensure that cherished assets—such as household items, memorabilia, and more—go to their loved ones. These can be noted down in one’s will or trust documents.

If they aren’t mentioned, the state might distribute the assets based on the statutes in the applicable jurisdiction.

Do All Estates Go to Probate?

Not necessarily. Probate law differs from state to state. In Texas, for example, the state may allow an estate to skip probate if the estate is valued under $75,000.

In many cases, a probate might not be necessary if the total estate valuation is less than the debts and liabilities owed.

How To Take Inventory of an Estate

If you’re the executor of the decedent’s will, you’ll probably create an estate inventory for probate. Or you may want to draft an estate inventory for your own estate planning. Either way, the process is largely the same. Here are the steps you need to follow when preparing an estate inventory:

1. Identify the Assets

The first step involves listing all the assets that are part of the individual’s estate. If the decedent has a will, take note of any assets mentioned. Next, you’ll need to search the person’s home and interview their friends and relatives to account for the assets. In addition, you’ll also need to go through the individual’s deeds and titles, statements of account, tax returns, safe deposit boxes, mail, etc.

If the deceased has appointed an estate planning attorney, you can get in touch with them to ask for information about the assets.

As you may have noticed, making a list of assets requires effort and investigation. You can start by separating assets into tangible and intangible categories as previously mentioned. If there’s too much inventory to track, you can even divide it into other subcategories like home inventory, automobile inventory, etc.

2. Note Details of Assets

Once you have a general list of the assets, the next step is to gather information about them.

If you’re listing a vehicle, you’ll want to note down its color, model, make, year, current mileage, and Vehicle Identification Number (VIN). When listing a house, you’ll note details like address, legal description, etc. For safety deposit boxes, record the contents and location. For matters like bank and retirement accounts, you’ll want to include their recent statements and balances along with the name of the bank, account number, the amount in the account at the time of the decedent’s death, etc.

Assets like jewelry and precious stones or metals require the executor to add more information such as cut, clarity, color, condition of use, etc. Don’t forget to include pictures of the assets.

Naturally, depending on the type of asset and the jurisdiction, the information you need to record will vary. To err on the side of caution, you’ll want to track as many relevant details in your estate inventory as possible to ensure efficient valuation and distribution.

Sometimes, you’ll need to keep copies of the bank statements. Other times, you’ll need to record descriptions of the assets.

By now, you’re probably worrying about the effort involved in keeping track of all the data in the inventory list.

What’s the best solution? While a spreadsheet may seem like an obvious option, it further increases your burdens. You not only have to reference the information when filing your probate form, but you may also need to update or add more information to the inventory during the process. A spreadsheet isn’t well-equipped to handle the strain.

An inventory management system is better suited for the task. Unlike spreadsheets, an inventory management solution lets you update and add new information to the inventory quickly and easily. You can reference information in seconds and share it whenever needed.

3. Appraise the Assets

The appraisal of assets is done to ascertain the value of the estate. While some assets (such as stocks and bank accounts) are easy to appraise, others (like artwork and real estate) are more challenging. In such instances, you’ll need to bring in a professional appraiser.

You also want to add all the information from the appraisal to your inventory along with the name and address of the appraiser.

4. Making a List of Debts and Liabilities

The next step is to make a list of mortgages, lines of credit, medical bills, student loans, auto loans, tax liens, credit cards, and other debts.

While many people don’t consider it a part of the inventory process, we suggest you take care of it during this stage.

Having information on the debts and liabilities can help your probate proceedings move along much faster. Besides, you’ll need to repeat the same research and investigation when preparing your list of assets.

Once your estate inventory is complete, calculate the total net worth after subtracting the liabilities from the estate. You can then fill out the inventory form with the probate court that’s in charge of overseeing the case.

Note that the deadline for filing the form along with the laws and policies can vary based on the jurisdiction.

If you’ve been appointed executor, you also need to pay any taxes and debts that the estate owes as well as oversee the distribution of the remaining assets to the decedent’s beneficiaries.

If you’re doing your own estate planning, your next steps involve writing a will, reviewing your assets, creating joint accounts, preparing legal documents, appointing an executor, and more.

Consequences of an Incomplete Estate Inventory

If you don’t include all the assets and their details in the inventory, you will have an incomplete estate inventory.

The biggest problem that arises from an incomplete inventory is it delays the distribution of assets to the heirs. In certain jurisdictions like Texas, delays in distribution, filing inventory, and appraisal could lead to the removal of the executor and serious civil penalties.

While the executor can request an extension, doing so can lead to problems. Probates are quite expensive and time-consuming, more so if there is no will. If you have an incomplete estate inventory, the costs of probate are higher as the process takes longer.

Apart from court and legal fees, maintaining the estate becomes more expensive over time. Properties incur expenses for utilities, taxes, and upkeep. Meanwhile, investments need to be actively managed. Any outstanding debts and obligations will continue to accrue interest.

Managing and maintaining assets can be a challenge for the executor. The greater the number of assets, the harder the task becomes. Moreover, certain assets could lose their value if they aren’t maintained or managed properly.

While all of this is going on, the financial dependents of the deceased may face hardship the longer that asset distribution is delayed.

Family members awaiting the estate’s settlement might feel frustrated and stressed if the probate is delayed. This can lead to disputes and even long-term estrangement.

There are also instances when the pressure to quickly liquidate assets forces heirs to sell them below their market value. This is often the case with stocks.

While probate delays can be due to many reasons, incomplete documentation is one of the most common obstacles. The good news is you can avoid the issue completely with an inventory management solution.

Manage Estate Inventory With Nest Egg

Whether it’s for estate planning or part of your duties as an executor, Nest Egg makes it easier to manage estate inventories.

Nest Egg allows you to capture the details of your estate inventory, add pictures, and attach sound bites or movies. There’s no need to input details manually. Simply scan the documents and your inventory gets updated. You can even create your own custom fields for the listed items.

Here are other functionalities you can look forward to:

If one of the assets in your estate inventory lacks a cost appraisal, you can easily search for its average price online.
You can log your inventory and record its status.
Nest Egg supports multiple users and maintains a record of their activities. This enables accountability, especially in cases where several people have access to the same database.
Nest Egg lets you record as many assets as you need.
It can be accessed from multiple devices.
Syncing is automatic. All the data you record from your device gets instantly synced to the cloud, reducing worries of incomplete and inconsistent inventories due to device errors.

Gathering all that data is hard enough. Don’t add database management to your list of responsibilities. Let Nest Egg give you a hand with its intuitive and versatile features. Designed specifically for inventory management, Nest Egg simplifies the process and helps you save time.

Nest Egg: Estate Inventories Made Simple

Putting together an estate inventory requires completing a series of tasks in the right order. At the same time, you have to keep track of applicable deadlines in your jurisdiction. With our guide, you can create an inventory more efficiently and systematically. Using tools like inventory management systems can make the task even easier.

We hope this article has helped you understand subjects like non-probate assets, appraisals, and details to include. Here’s hoping your estate plan or will execution go smoothly!