Helping Clients Create an Up-to-Date Inventory

If you have already done estate planning by creating a will or trust, then you have taken a very important step toward ensuring that if you become incapacitated or die, your loved ones will know how to help manage your financial and legal affairs. However, simply having a will or a trust and related estate planning documents is often not enough. An inventory of all of your accounts and property is crucial for helping your loved ones manage your affairs effectively. Many times I have received calls from distressed children who know that a deceased parent had a will or a trust, but have no idea what accounts, insurance policies, or items of real and personal property the parent owned. If an inventory was never prepared and shared with the parent’s attorney, the child likely had to spend countless hours meticulously combing through the parent’s file cabinets, drawers, tax returns, and online accounts to identify what the parent owned. Needless to say, this is not something that anyone wants to happen. Even if you haven’t started or completed estate planning, there is no need to wait to prepare an inventory of your property until these legal documents are created. In fact, assembling an inventory can be an excellent first step that encourages you to begin the estate planning process. This preliminary effort will allow you to walk into my office and almost immediately begin to focus on creating a will or a trust that considers each of your items of property and how they should be coordinated with your estate planning goals. With a complete and accurate inventory in hand, there is little doubt that I will be impressed and grateful for the effort. Even if you never get around to creating a will or trust (of course, this is strongly recommended), a complete inventory of your property will at least help your loved ones quickly identify the property that you own and the next steps that you will need to take in order to gain control of the property and distribute it according to state law. This step alone will significantly reduce the time and costs of administering your estate in the probate courts. And anytime that I, as your advisor, can help a family bring order to chaos, well this makes me happy.

How to Create an Inventory

Creating an inventory of your accounts and property need not be terribly complicated. It can be a simple word processing document or even a handwritten list. Many individuals create spreadsheets in software programs like Microsoft Excel, Numbers, or Google Sheets. There are also numerous online services that can help you create a thorough inventory of your property, store passwords for online accounts, and even store digital copies of your important legal and healthcare documents. Many of these services have features that enable the you to automatically share this information with chosen individuals at a designated time. The bottom line is that any of these above methods can work well—the important thing is that you prepare an inventory, another thing that I can help you accomplish. Below is an example of an inventory formatted as a spreadsheet with columns and rows:

Property TypeProperty DescriptionEstimated ValueDebt/LiabilityOwner/BeneficiaryAccount/Serial No.
ResidenceHouse at 1234 Elm St., Pleasantville$350,000$118,000Jointly titled with spouseProperty Tax Parcel ID No. 11223344
Lakeside cabin1 acre cabin in Kane County$150,000No debtDoe Family Living Trust dated 01/02/99Property Tax Parcel ID No.555666777
Term life insurance20-year term policy ending in 2030$200,000 death benefit (no cash value)Monthly premium of $85John Doe/Jane DoePolicy No. 99999
Checking accountWells Fargo personal checking$20,000N/AJohn DoeAcct. No. 55555512
SavingsLakeside Credit Union savings$50,000N/AJointly titled with spouseAcct. No. 9999999
Edward Jones brokerage$110,000N/AJohn Doe/no beneficiaryAcct. No. 333333
Vehicle2018 Honda Accord$35,000$20,000Jane DoeVIN No.: 12345566334J
FurnitureLarge oval antique mirror$10,000N/AJane DoeN/A
401(k)Adobe Inc. 401(k) plan$430,000N/AJohn Doe/Jane DoeAcct. No. 988756
IBM stock certificates$85,000N/AJohn DoeCertificate Nos. 1234; 9932; 9935
Loan to brother inlaw (Bobby Mooch)$50,000N/AJohn and Jane Doe, jointly ownedPromissory note dated 11/2/2001 (in safety deposit box at Lakeside CU)

Of course, this is just an example of what an inventory could look like. You should include any information that may be helpful to someone who is put in charge of collecting your property after death or disability. You might also include more details beyond what is shown above, such as where the property is located or even the property’s acquisition value to establish tax basis on the property. For example, if you keep certain items of jewelry in a safe, or if your boat is stored in dry storage, this would be crucial information to include.

Probate and Your Property

As you or we create the inventory and discovers how each item is titled or who is named as the beneficiary on certain accounts, you will be able to identify those items of property that will have to go through probate. Probate is the court process that appoints an executor or personal representative to inventory a deceased person’s probate property and distribute it according to state law or the terms of the deceased’s will, if there is one. Generally speaking, any account or property that meets the following conditions will have to go through the probate process: (a) is owned only in the client’s name, (b) is not owned jointly with another person, (c) is not titled in the name of a trust or business entity (like an LLC or partnership), and (d) does not have a named pay-on-death (POD) or transfer on-death (TOD) beneficiary associated with the property. Probate can be an expensive, time consuming, and very public process that most people would rather avoid. This is why preparing an inventory well before your death can alert you to those items of property that will require a probate so that you can take steps, while still able, to transfer ownership or retitle them in a way that helps the family avoid probate. This might include making sure a beneficiary has been named or establishing a trust into which certain property can be transferred.

Additional Benefits of a Complete Inventory

A detailed inventory can help your loved ones understand the next steps to take control of your property for management and distribution. Certain items and accounts, such as the following, may be distributed according to the unique legal aspects of that type of property:

  • Property owned in joint tenancy with rights of survivorship (such as real estate or bank accounts) will pass automatically to the surviving joint owner.
  • Some bank accounts may have POD or TOD designations that allow for those accounts to skip the probate process.
  • Life insurance proceeds typically will not have to go through probate if you have properly completed the beneficiary designation form by naming loved ones, a trust, or a charitable organization as beneficiaries on the policy.
  • Accounts and property titled in the name of a trust can be distributed outside of probate according to the terms of the trust.
  • Retirement accounts usually require the listed beneficiaries to file a claim with the account custodian before benefits will be paid out. Probate courts and trusts usually have no control over retirement accounts.
  • Vehicles will typically need to be transferred through the local department of motor vehicles, which requires an affidavit along with a death certificate and the physical car title.
  • Items of personal property (e.g., furniture, jewelry, art, collections, etc.), if above a certain value as determined by state law, must usually pass through probate, unless they are transferred into a trust before death.

What to Do with the Inventory Once Created

After creating an inventory, do not forget to store a copy where your loved ones will be able to easily access it should something happen to the client. I suggest the following locations as options:

  • an estate planning portfolio or binder that is easily accessible to family or friends
  • a file folder that is clearly marked and easily accessible
  • Your file with my name and my office phone number as your estate planning attorney
  • an electronic document format that can be shared online with trusted loved ones
  • a clearly labeled USB drive in a safety deposit box or safe (as long as you let loved ones know what to look for and where to find it)

Once you have created and shared the inventory, you should create a plan for updating. Over time, accounts get closed or consolidated with other accounts, property is sold, stocks get converted to cash, and retirement accounts get depleted. If you fail to regularly update the inventory, there is a chance that an old inventory could create confusion and send you or your loved ones down rabbit holes as they try to handle your client’s affairs. My assistance with this process can also help you discover accounts and assets that I can help you manage, consolidate, and simplify. Some people find it helpful to choose a specific date each year when they will review and update their inventory with me and other estate planning documents. Whatever will work best for you should be a part of the plan. Together we will implement the plan and stick with it. Helping you understand the great value that can be created through a simple but critical inventory has been an honor. I look forward to meeting you. I hope this helps and remember to enjoy every moment of your life!!