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[Music] welcome friends to the probate nation show i am richard redding our show this evening is about how to properly prepare the virginia estate inventory this is the very first document you will file with the commissioner of accounts in the course of your probate trained journey as the executor of an estate as we start this discussion i am reminded of a famous golf expression called the mulligan a mulligan amounts to a do-over of a bad shot in the course of your round of golf the legend has it the term was named after a locker room attendant named john a buddy mulligan who worked at a club during the 1930s and was known for replaying shots particularly on the first tee i can i know the feeling in our show tonight you will learn how to properly complete this initial filing and get off to a good start with the commissioner without the need for a mulligan and to leave this discussion we are pleased to have brian lowe from grinnings and low to walk us through the preparation of the inventory let me tell you a little bit about brian brian is co-founder of grinnings and lowell llc a fairfax city accounting firm founded in 2014. this firm specializes in virginia inventory and accounting filings submitted to local commissioner of accounts for virginia estates trust and conservative ships prior to forming grinnings and lowell he worked as an auditor for the fairfax county commission of accounts for several years please welcome brian lowe hi brian good to see you again hey richard thanks for having me it's nice to have a chance to talk about this topic which i know you're intimately familiar with in your years of service to the commission of accounts let's take a look at the state inventory form for just a moment you know the top part of that form has a whole bunch of information that might seem kind of overwhelming but i think we want people to understand that really all you really need to complete this form is your certificate of qualification which you got when you qualified at the local probate office with that information and things you know about yourself you should be able to go ahead and get that get that first part of that thing prepare brian tell me a little bit about what's the purpose of the inventory form to be filed by a duly qualified virginia executor so the inventory is the first step in the accounting process for any fiduciary that's court appointed in the state of virginia it is your representation as fiduciary to the court and to those interested parties uh regarding the assets of the decedent that you will be overseeing and administering that includes uh identifying information for each asset that's being probated along with the values at the date of death for every asset and this is part one so once you once you file this account inventory you will then be required to file accounts thereafter that document and record the transactions and your administration over those assets so does the value report on the inventory form which has five parts and we're going to get to those individual parts in a second does that need to be when we file the inventory form does that do those values have to be supported by any statement showing where you got the value so the answer is no the commissioner's office that receives your filed inventory does not verify the value of the assets the commissioner's office does not verify that those are the only assets or that those are even the proper assets this is primarily and chiefly and solely your representation to the court about what those assets are and what those values are so uh if you get a value wrong it is possible to um to adjust it later and there's several ways you can do that we can talk through what that looks like as we go through the form sure uh so what we want to do with the show tonight is to show our get our audience exactly how to report each item on the inventory so let's begin with part one page one part one of the inventory form okay so we show that on screen and let's begin to kind of take take apart you know the the different types of assets so let's talk first off what type of assets are actually reported here in part one so in part one as the title on the section describes this is the personal property of the decedents uh so this is the personal property the decedent owned solely so not property owned by anyone else or co-owned by anyone else and not real property so not real estate this is literally everything else that the decedent owned which should be the bulk of uh decedent's estate for the in terms of the quantity of assets so in addition to real estate um what assets in the name of the decedent are not included in part one that's all those joint acids those are excluded any asset that's jointly owned with someone else or that may pass uh to another upon the death of the decedent so any kind of certificate of deposit or ira or 401k jointly owned accounts those those get reported in this different section of the inventory okay and again what value should we should be assigned to these assets how do we pick the value those assets the value for those assets will be the date of death value so whatever the decedent owns whatever it was worth when the decedent died that's what you're representing to the court the value of their estate okay and then what type of detail should be reported for assets listed in part one i'm just going to start with part one we'll get to the other parts later so it depends on the asset there's there's certain rules for each type of asset but essentially what you want to show is enough sufficient information to clearly identify and distinguish that asset from any other asset as well as the actual dollar amount of that asset all right so we're going to turn let's kind of break down um these assets kind of go through one by one at least most of what are the i consider the common assets so let's start with bank accounts so up on the screen how should checking account and savings account and market money accounts be reported and we we put up on the screen an example and let's talk through how those things should be reported sure so any cash account any account that's chiefly and only cash so savings accounts checkings accounts cds money market accounts all those accounts should be identified by showing the name of the institution the type of accounts and the last four digits typically of the account number that clearly and that clearly identifies and distinguishes that account and that asset from any other asset so let's the next one we're going to take a look at and again pull up on the screen is certificates of deposit with the bank so how should these cds be reported and we're showing on screen now what the what we we would do so the extra piece of information with a certificate of deposit is usually going to be the term length of the cd so whether it's a 48 month 60 month 3 year whatever uh cd again you want to show the name of the institution the fact that it's a certificate of deposit the last four digits of the account number just to distinguish it and then the term of the cd okay all right the next asset we're going to talk about and coming up on screen is broker a brokerage non-retirement account so up on the screen we're going to show a brokerage account as we would suggest it be reported how should the tell us about how these account how a brokerage account that's not a retirement account should be reported here so a brokerage account is usually where people get tripped up because uh oftentimes the temptation is just to show the actual brokerage account and then the sum total of the value what you really need to do with brokerage accounts is show the individual assets that make it up so that could be the cash uh the cash account the sweeps account that's going to be every individual stock uh so you'll need to show the under all the underlying assets showing both the name of the asset the number of shares of the asset that are held and then the current market value again at the date of death for that asset okay and a lot of times you can probably get that prepared by the brokerage house so you actually get a statement which you could attach and reference if you wanted to do that is that true yes and we recommend that to most clients just to make it easier instead of having to try to do some math to figure out what the date of death shares were and what the price per share was on the date of death just have the brokerage house run a report for you it'll cost you some money but it's worth the investment all right so the next asset we're going to talk about is individual stocks which we're pulling up on screen and show how should these individual stocks be reported here so it's going to be similar to the description with the brokerage account except now you're not part of a larger account you maybe these are certificate shares again you want to just show the the company that's invested uh you probably want to show if there's a special class to the shares what class they are if their distinction is relevant and then the number of shares the price per share and the total value of those shares on the date of death okay all right so the next after we're going to talk about is retirement accounts so typically retirement accounts have beneficiaries would name somebody so we're assuming in this situation somebody forgot to name a beneficiary so the account is payable to the estate okay it has its own set of assets tell us how the retirement accounts should be reported here as well so retirement accounts are going to be uh the same as a general brokerage account you're generally going to show usually they'll be mutual funds or some other target date fund that might be there but you're going to show the number of shares for that fund the value as of the date of death again you want to go to the uh to the custodian of the 401k to get that valuation report you will want to show whether it's a 401k or an ira so again the type of account is is part of the identifying process okay and it's important to avoid confusion excuse me the the data depth value for a retirement account is not really relevant for tax purposes at all but it is relevant for purposes of reporting on the inventory form so clients don't forget um all right life insurance proceeds i have a life insurance policy again normally you would have a beneficiary name someone does not have a beneficiary the default is typically going to be the estate tell us how life insurance proceeds get reported on the inventory form so this could kind of depend on the type of uh life insurance that you have uh typically what you would show is that the name of the company so you might show prudential uh you might you'll show the last four digits of the account number for the for the policy and then you'll say you know what's the death benefit if it's a you know if there is a death benefit if it's a term uh life insurance then you might show you know what you expect to be the the income for let's say 12 months as the value for that asset okay okay so everybody has an automobile and boats or not everybody has boats but certainly has automobiles so we have these assets and again there's no pod on the on the on the title so it goes through the state how are autos and boats reported on the inventory for vehicles like boats and automobiles what you want to show is the year make and model that's typically sufficient in order to identify the assets in case of collectors of automobiles you might want to add color if that helps to distinguish certain vehicles but it's usually not required okay all right so someone's passed away sometimes they may have a series of uncashed checks refunds checks etc that didn't get direct deposited that are sitting on their desk how should the uncashed checks be reported typically what i tell people and what we typically do is report the source of the refund so it could be a utility company uh and then you would show the date of the check and then the amount of the check and that's usually sufficient and then obviously that it's a refund check okay all right next thing we're sort of getting down to the bottom of our list household furniture clothes and other intangibles how is all that to be reported so this is where i see a lot of people get tripped up as well anything that's tangible if it has a nominal value or very little value you can typically aggregate it together under one entry and call it tangible personal property typically most people will report five hundred dollars for that amount uh anything that is in and of itself worth more than five hundred dollars you are required to identify separately and list and itemize so uh jewelry uh you know particular artwork um it really just depends on the type of tangible property uh you at the end of the day you wanna make sure you're identifying it clearly and distinctly so that a third party can can to know what you're referring to and then make sure the valuations again are supported by either a sustained appraisal or some fair market value that that is reasonable okay we just we we we're seeing more and more probates involve the probate of guns so how should guns be reported on the inventory for the gun i would show the uh make and the the manufacturer of the gun uh i would show the caliber of the gun and the type of gun that it is and then i would show a reasonable estimate of its fair value which you might require an appraisal and most likely will okay a lot of people are are maybe waiting to receive inheritances and then pass away themselves okay so how should any inheritance that i'm going to be receiving uh be reported on the inventory form so this happens sometimes you may not know how much is to be expected from the estate that other estates might still be mid administration um so what what typically you would do is show inheritance from the state of so and so um and you might identify yourself uh the estate that you're charging the inventory over as a residual beneficiary or a specific beneficiary and then just describe what you expect to receive as the amount from that estate and if you receive more or less that's something that gets handled over the accounting process okay so all these numbers add up to give us a total for part one that's correct and we want to keep in mind that that part one will automatically total on the form depending on what how you're filling the form out um and it goes towards figuring out what your bond has your bond up should be if you're whether you're bonded with surety or not let's look at part two so part two is is kind of unique uh we did a show about this i want to call folks attention to this about you know joint accounts payable on debt or transfer on debt bank accounts joint joint uh credit union account stuff like that cds for instance that are joint or pods so how are all these reported uh you know and as we look at the screen of of of how we would suggest they be reported how do you what what are we looking to capture here so you're going to show the same information you would show in part one except you're going to add both the type of ownership so maybe it's joint ownership with right of survivorship and then you're going to write down typically you would write down who else who owns it so you would want to you want to show these these are these are it's important to identify these um in the inventory process but at the same time you also want to make sure that they are not considered part of the probate estate when you're going through and reporting on assets to the court uh it's this is really typically the only time you'll report on them unless barring some other circumstance so what we learned in in in our show about joint accounts this is a process to put people on notice about the existence of the accounts uh these accounts actually could become subject to reclaim to be claimed by the estate if they needed to pay the bills or taxes and they didn't have enough money okay but there are some special rules that govern that but we did a show with two local estate attorneys that talked about this in some detail which i would call people's attention to all right let's take a look then let's go to the next part which is part three and this is called virginia real estate with power of sale so part three reports all the real estate over which the executor has the power of sales so how can someone determine if they have power over sale over virginia real estate owned by the decedent so the the memorandum of facts that you receive from the court when you qualify will let you know if you have power of sale over any real estate typically that happens if the will specifically grants that power or the court identifies it for you and again it'll be present in the materials that when you go to qualify it'll tell you yes you do have power of sale or that will say power of sale no at the bottom of that minimum of facts yeah so you brian's you're referencing a memorandum of facts that you would want to get a copy of when you qualify so you have that in your file so that tells you a lot of information now the type of real estate that's reported here would be real estate that's owned either solely in the name of the decedent or maybe they own a fractional interest like attendance and common interest in a piece of property is that what goes here correct right that's exactly it so anything that you could sell uh and and use the proceeds of in the course of the estate that uh that would what you would report and part three so in part three we show up on screen shows you how to report that what kind of evaluation should be reported here brian uh typically i tell people to use the latest tax assessed value that's usually the simplest there might be a good reason to get an appraisal if you think the tax assessment is unreliable or there's some other special cause or situation going on with the real estate uh but typically an appraisal isn't is it typically unnecessary and it's good enough just to use the tax assessed okay um so let's go we got a couple more sections of all deal with real estate okay so if i have virginia real estate that has no power sale it goes in part four um so these are the ones that your memorandum facts say no power sail over right correct yes and again we would we would simply we'd not we would and this part this does not count towards your bond um and again you can i guess you would use a um a tax assessed value yes the same the same situation you would identify with the full address of the property and then use the latest tax assessed value okay uh and then lastly is part five this is all the real estate or that's located outside of virginia okay so what what you know we how much detail do we need to provide here so again you want to show the address of the property um and then i think you had mentioned fractional shares so to the extent that there's a f decedent owned a fractional share in a vacation home in another state you would want to identify that as well and make sure that the value represented that factional share interest also so in part five if you have real estate identified here you are probably going to have to go ahead and do what's called ancillary administration in another state because we've done a lot of tv shows about ancillary probate and in other states you know a number of states across this country so i would call your attention to taking a look at the probate nation website you can get educated about what needs to be done and if your property happens to be located in that particular state let's talk about uh you are a former auditor okay so let's talk about you know talk about common auditor issues that we face with an inventory so the common auditor issues that i would see would be either kind of twofold one would be the personal representative didn't properly identify the asset so in the case of bank and brokerage accounts they sometimes omitted the last four digits of the account number uh but the decedent could own several you know bank several accounts with the same institution so you want to make sure you're clearly distinguishing them and the account numbers do that the other thing that would happen is brokerage accounts might you might just see a total figure for a brokerage account with again without any underlying detail and the the commissioner's office really needs to see the underlying assets that make up that uh that brokerage account so we want to see each individual stock we want to see the number of shares for that stock we want to see the price per share of the stock at the date of debt and then we want to see the total value then the last thing that would cause issue uh for some folks is is just the math involved with it so calculating the right fair market value the right price per share for each stock etc math problems tend to tend to crop up every now and then as well okay so we talked about at the beginning the show about mulligan so i guess the commissioner's office will give a an executor some opportunity to to do some do-overs and fix problems that's correct yeah so if you need to you the inventory section on the top of the form will give you an opportunity to say this is the first time you're filing the inventory this is an amended or restating inventory you might need to file another inventory later that adds additional assets that maybe you found after the fact so these all the issues that can happen uh and can happen innocently are able you are able to correct with either restating the inventory and there's also some options to avoid resting the inventory and just correct do your mulligan on the accounting as it were okay now let's just say the inventory is in perfect form ready to be approved is there anything that could prevent the inventory from being approved sure if you're missing a signature if you're using a copy of the signature so you want to have an original signature on your on your certificate of accuracy at the end of the inventory that's that's critical and then if you're missing certain pieces of information um at the top of the inventory uh then then that might prevent it also fees taxes uh those things might also prevent it if those are unpaid and i i i've seen uh in some situations too if you you have to file an affidavit of notice uh with the probate office and i understand that the auditors will check to see if that's been filed and if it has been filed they will tell you we can't approve you until you get that file is that true right so a big a big component of being a personal representative is providing notice to all the interested parties all the beneficiaries any any creditor so you file an affidavit saying basically affirming that you did notify the interested parties that you're the person representative that you're you know this is the value of the state etc and that gives them notice that this is happening and they can now start to engage with you so if that's not done then the commissioner will not approve the inventory because they want to make sure that everyone has a chance to be aware of of the filings as they happen and not after the fact so the last thing i want to cover before we go to closing comments is you know the inventory on page one collects information as far as the totals of part one and part three in order to calculate the bond that you're supposed to have whether the bond is with or without surety if it turns out that the bond that you got qualified with is lower than what the value should be based on what the inventory is reporting will that prevent the the inventory from being approved it will not prevent approval so you'll still get approval uh what you will be notified is that you need to increase your bond uh and that might apprent prevent approval or the lack thereof might prevent approval on future filings with the commissioner's office so the inventory can still go uh by the accounting uh the commissioner might stop you from moving any further okay so those are things to keep an eye out for well we're nearing the quarter the end of our time here brian we covered a boatload of information and really dug deep into your memory banks of experience uh share some final comments suggestions you know pitfalls to avoid for folks preparing the inventory so they can move forward as quickly as and as easily as possible so i guess i would tell uh fiduciaries that are undertaking preparing an inventory to uh don't get caught up uh over over identifying tangible personal property and under identifying financial securities that they see known that's typically what happens uh just aggregate your tangible personal property it's more more likely than not not worth much and then make sure that you are communicating with the bank and brokerage houses and requesting from them the information regarding the valuation just make it easy on yourself you don't have to calculate yourself you can typically have these institutions prepare these date of death valuation reports and send them to you and that's true also of cash accounts as well so i would i strongly encourage fiduciaries to do that just to make the reporting process that much easier brian thank you very much for taking the time today thank you for helping me with the preparation of this you need you really contributed so much and a great service to the folks in the community and certainly to to our commissioner of accounts from time to time that uh may lean upon you guys to help you know get people straightened out who aren't doing things correctly uh so thank you very much and and thank you for the service to the community thank you richard i always enjoy being here these are a lot of fun to do and i'm just happy to be part of the process thank you again for the time you know for those inclined to prepare the estate inventory on your own i think this show will provide you with some great guidance on how to do it properly and if you make a mistake the auditors at the commissioner of accounts office will give you some mulligans to get it right but as brian pointed out in his closing remarks and i want to stress if you get a letter from the commissioner's office telling you of an error on the inventory do not ignore the letter those mulligans can go away as quickly as they are extended deal with the issue promptly and if you find yourself baffled as to how to respond to the commissioner reach out to your attorney or account you have handled the preparation of the inventory for guidance friends this brings us to the conclusion of our show i hope you found it helpful replays of shows can be viewed on the probate nation website and the youtube channel again thank you for visiting with us and until next time be safe out there [Music] you