How estate inventories and asset values work

Research notice: Inventory requirements depend on the state. The examples below address contents, deadlines, appraisal assistance, corrections and access to valuation information. Federal estate tax valuation has separate rules. Ask an estate attorney or CPA to confirm the requirements and valuation approach for the estate.

Finding assets and records

In Minnesota, for example, probate administration concerns property passing by will or intestacy. Joint account balances belong to surviving parties as against the estate unless clear and convincing evidence establishes a different intent or a will specifically refers to the account. Securities with a transfer on death registration pass under that registration outside the will. Those transfer provisions do not limit creditors' rights against beneficiaries and other transferees under other Minnesota law. Other states differ.

The federal gross estate includes property to the extent of the decedent's interest at death and jointly held property under the federal inclusion rules. Keep the ownership question separate from the valuation question when discussing an asset with the estate's advisers.

For locating assets and records, use the estate administration guide. For valuation details, start with the relevant asset discussion:

• Investment account holdings: federal stock and bond valuation.
• Property descriptions: federal real estate return documentation.
• Business interests: partnership and proprietorship valuation.

What an inventory records

In Florida, unless an inventory has previously been filed, the personal representative must file a verified inventory. The inventory must describe estate property in reasonable detail and give each item's estimated fair market value at death. Other states differ.

In Maine, a personal representative must prepare an inventory within three months after appointment. The requirement excludes special administrators and successors whose predecessors have already discharged this duty. The inventory must describe property owned at death in reasonable detail, with each item's fair market value at death and any encumbrance's type and amount.

Maine also requires a schedule of credits identifying obligors, amounts due and the nature of each obligation. The schedule must state the amount of all credits exclusive of expenses and settlement or collection risk. The representative must either file the inventory with the court and furnish it to requesting interested persons, or mail it to all requesting interested persons. A mailed inventory may also be filed with the court. Other states differ.

For the Minnesota contents, deadline, exceptions and recipients, see What information can an estate inventory include? The Florida provision linked below addresses contents and verification. Consult the applicable procedural authority separately for Florida filing timing.

Valuing property without a ready market

In Oregon, the personal representative may employ a qualified, disinterested appraiser when an estate property's value is subject to reasonable doubt. Different appraisers may appraise different kinds of property, and any appraisal made under this provision must be in writing and signed by the appraiser. The court may direct appraisal of all or part of the estate by appraisers it appoints. Appraisers are entitled to reasonable fees and necessary expenses from the estate. Other states differ.

Minnesota's permission to employ an appraiser, including its inventory identification requirement, appears in How are assets without a ready market valued? Ask the estate's adviser which appraisal provision applies before commissioning a report.

Federal fair market value

For property includible under the federal gross estate inclusion provisions, fair market value generally means value at death. A qualifying alternate valuation election uses the dates and adjustments described below. Fair market value assumes a willing buyer and willing seller, neither compelled to transact and both reasonably informed.

Use the market in which the item is most commonly sold to the public, considering location where appropriate. A forced sale price is not the standard. A local assessed value is acceptable only if it represents fair market value on the applicable valuation date.

The executor may elect alternate valuation for the whole gross estate only if the election reduces both gross estate value and combined estate and generation skipping transfer tax. The election is made on the estate tax return and is irrevocable. No election is permitted on a return filed more than one year after its filing deadline, including extensions.

Under that election, property distributed, sold, exchanged or otherwise disposed of within six months after death is valued on its disposition date. Other property is valued six months after death. An interest affected by mere lapse of time retains its value at death, adjusted only for changes unrelated to that lapse.

Discuss the election with the return preparer before choosing a valuation date. For filing scope and related reporting, use the estate tax filings guide.

Marketable stocks and bonds

For federal estate tax, stocks or bonds with a market generally use the mean of the highest and lowest quoted selling prices on the valuation date. If no sales occurred that day but sales occurred within a reasonable period on both sides, use the means on the nearest sale dates. Weight those means inversely by their trading day distances from the valuation date.

Separate rules address bond closing prices, bid and asked prices and incomplete prices. If the quoted price method does not reflect fair market value, reasonable modification or other relevant valuation facts are considered. Ask the return preparer which method in the securities valuation regulation fits the available quotations.

Real estate documentation

For federal Form 706 Schedule A documentation, describe real estate in enough detail for the IRS to locate it for inspection and valuation. Give each parcel's area and describe any improvements. Explain how the reported values were determined and attach copies of any appraisals.

Use the federal return instructions for supporting documentation. For mortgage reporting, consult the estate tax filings and related reporting guide.

Correcting an inventory

In Minnesota, for example, newly discovered property or an erroneous or misleading inventory value or description requires a supplementary inventory or appraisement. The personal representative must show the new item's market value at death or the revised market values or descriptions. The supplement must identify any appraisers or other supporting data relied upon.

The representative must furnish copies or information to persons interested in the new information. The supplement must be filed with the court if the original inventory was filed. Other states differ.

For Florida's correction requirement, see When must an inventory be corrected? Ask counsel to review the original description, reported value and information prompting the correction.

Business interests and inherited basis

For federal estate tax valuation of a partnership or proprietorship interest, consider a fair appraisal of all business assets as of the applicable valuation date. Include tangible assets, intangibles and goodwill. Consider the business's demonstrated earning capacity and applicable corporate stock valuation factors.

Submit complete financial and other supporting data with the return, including relevant expert reports prepared as of or near that date. Ask the return preparer to identify the appraisal and supporting financial materials needed for the interest.

For inherited basis eligibility, valuation alternatives, income in respect of a decedent, returned gifts and estate tax consistency limits, read the inherited basis, values and reporting guide.

State procedures and different details

For Minnesota's inventory deadline and recipients, read the Minnesota inventory example. Compare it with the Florida and Maine requirements when asking counsel about preparation, filing and delivery. For appointment and authority questions, consult the estate administration guide.

In Florida, a beneficiary may request in writing a written explanation of how an inventory value was determined or a copy of an appraisal if one was obtained. Residuary beneficiaries and heirs in intestate estates are entitled to that information for all inventoried assets. Other beneficiaries are entitled to it for assets distributed or proposed for distribution to them.

The personal representative must notify every beneficiary of these rights. Requesting or failing to request the information does not affect beneficiary rights in later proceedings concerning an accounting or the propriety of the representative's actions. Other states differ.

Common questions