What's an estate inventory and why do I have to prepare one?

When I meet with a new probate client, we talk through what to expect and how we get from Point A to the final destination of a fully-administered estate. One of the requirements that has to be met along the journey, if there’s an administrator or executor of the estate, is the preparation of an inventory.

This requirement can be a source of confusion and worry at first. It sounds like a big job, especially for any of us who have ever worked retail and remember having to prepare inventories by hand. Does preparing the estate inventory mean having to go through and catalog every item in the house, down to each spoon in the silverware drawer? Do you have to hire an appraiser? What about estate liabilities? Do you have to list those?

The good news is that while it sounds intimidating, preparing the inventory is generally not a particularly difficult or time-intensive task. In fact, in most cases, we could prepare a rough draft of it right then during the initial consult and have a good framework that just needs specific numbers and details plugged in to make it final.

It’s always my goal to try to simplify the probate process and provide accessible information about the various steps so you’ll have a better understanding of what we’re doing, why, and how. To that end, here’s a quick overview of the probate estate inventory. (There’s a similar process for guardianship estates, and the rules are similar, but values are as of the date of appointment, not date of death.)

What’s an estate inventory?

In a probate estate, the inventory is a listing of all estate property owned by the decedent at the time of their death, valued as of the date of death. Think of it this way: if a balance sheet generally has assets, liabilities, and equity, the inventory is just the assets section.

Ok, what’s estate property?

Estate property is the property that passes under the will if there is one or through intestacy if there is not. Estate property does not include property that is passed to someone else by beneficiary designation, right of survivorship, or other non-probate transfer. Think of it this way: a beneficiary designation takes effect instantaneously at the moment of death. The probate process comes along to dispose of any property that’s still there 30 seconds later. That’s what’s subject to estate administration, and that’s what goes on the inventory.

Does estate property include property outside of Texas?

If you’re appointed as administrator or executor of an estate by a Texas Court, that Court has jurisdiction over personal property (“stuff”) anywhere and real property (“dirt”) in Texas. If the estate owns real property in another state, the Letters issued to a Texas administrator or executor don’t give authority over that state’s dirt. Each state’s courts get to control their own dirt, so the inventory the executor completes in Texas does not include the foreign-state dirt.

How do I find out the date of death values for estate property?

For real property, we can often use the appraisal district’s valuation or other good evidence of the market value. For vehicles, Kelley Blue Book serves as a useful reference. For bank accounts, the account statement from the period inclusive of the date of death generally enables us to determine the value. For securities, we can’t just go from the statement but need to determine the values of the securities as of the date of death. For these categories of assets, we can assist you with determining the value, and often, they’re fairly straightforward.

What about personal property? Do I have to itemize everything in the house?

No—this is often something a client worries about and feels overwhelmed by the prospect of doing. Luckily, you don’t have to provide a detailed listing of every item of personal property the decedent owned. Instead, we imagine that all of the “stuff” the Decedent owned was put out for a yard sale to be sold as-is; what would the whole set go for? With limited exceptions, used household items are of relatively low value (no one wants our old stuff as much as we want our old stuff!), so a ballpark value that accounts for that is generally sufficient. If there are any individual items or categories of items that have exceptional value, such as jewelry or art, we may include a separate line item for that item or category, but often the “stuff” portion of the inventory is just a single line item. No need to count all the silverware in the drawer or DVDs in the cabinet.

What about claims? Does that mean debts the Decedent owed?

No, the “claims” section of the inventory includes money that was owed to the Decedent, not by the Decedent. Claims are money the Decedent would be entitled to if they were still living. For example, if the Decedent was entitled to a tax refund, that would be listed as a claim of the estate, as would a final paycheck earned but not yet paid. If the Decedent was injured or killed due to the actions of another party (for example, a car wreck in which the other driver was at fault), that would also be a claim of the estate. Early on, the value of potential claims may be unknown; it’s okay to list claims with unknown value on the inventory, and it’s okay to list claims that may not possibly pay out.

So do I have to list estate liabilities at all?

Money owed by the Decedent is not listed anywhere on the inventory. The inventory is just a listing of estate assets potentially available to beneficiaries or estate creditors. So, if the Decedent owned a house worth $200,000, but the house is subject to a mortgage of $50,000, the house would be listed on the inventory at the value of $200,000.

How long do I have to file the inventory?

Per Texas Estates Code, the executor/administrator has 90 days from the date of qualification to file the inventory. In practice, most Courts will routinely grant at least a 90-day extension upon request; some are liberal with further extensions, while others expect at least an initial inventory to be filed relatively soon. In either event, it’s possible and appropriate to file an amended inventory if you learn of additional property or of a more accurate value for an item.

Does the inventory always have to be filed with the Court?

Not necessarily. The Estates Code provides that if there are no creditors other than those secured by liens on real estate (i.e., no creditors other than a mortgage on the house), the administrator need not file the actual inventory with the Court but need only provide copies to each beneficiary and file an affidavit with the Court swearing that they did so. Note, however, that this is only an exception to the requirement to file the inventory, not an exception to the requirement to prepare one. Any time an administrator or executor is appointed, an inventory has to be prepared.

Other than because the Court says I have to, is there any other benefit to preparing an inventory?

Yes. The inventory can serve as evidence of the date of death values of estate property, which may be helpful in showing the new tax basis property acquired at death. It can also help identify for estate beneficiaries what assets the estate has and, if there are any creditors, may show them that there aren’t enough assets to satisfy their claim, perhaps dissuading them from taking further action.

Do I have to prepare the inventory all by myself?

No, we’ll guide you through the process, from identifying the assets to include to determining the date of death values, and we’ll take all of that information and gather it into inventory form. We’re with you every step of the way to get this done.