Posted by:  The Life and Legacy Planning Group

If you have already done your estate planning, you have taken a significant step toward ensuring that your loved ones will know how to manage your affairs if you become incapacitated or die. However, simply having a Will or a Living Trust and related estate planning documents is often not enough. A detailed inventory of all your accounts and assets is crucial for helping your loved ones manage your legal and financial affairs effectively.

Most estate planning attorneys have received calls from distressed children who knew that a deceased parent had a Will or a Living Trust, but had 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, mail, and online accounts to identify what the parent owned.

Needless to say, this is not something that anyone wants to deal with. Even if you do not have a Will or a Living Trust in place, you do not need to wait to prepare an inventory of your assets until you have created these legal documents. In fact, assembling an inventory can be an excellent first step when it comes to your estate planning. This preliminary effort will allow your attorney to immediately begin focusing on the creation of a Will or a Living Trust that takes into account each of your accounts and other assets and how they should be coordinated with your estate planning goals. If you take this step, your attorney is guaranteed to be impressed and grateful for your preparation.

How to Create an Inventory
Creating an inventory of your accounts and assets does not need to be very 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 assets. Many of these services enable you to automatically share your inventory with chosen individuals at a time that you designate before death or disability strikes. The bottom line is that any of these methods can work well—the important thing is that you create an inventory. Below is an example of an inventory formatted as a spreadsheet with columns and rows:

Asset Type Asset Description Estimated Value Debt/Liability Owner/
Beneficiary
Account/
Serial No.
Residence House at 1234 Elm St., Pleasantville $350,000 $118,000 Jointly titled with spouse Property Tax Parcel ID No. 11223344
Lakeside cabin 1 acre cabin in Kane County $150,000 No debt Doe Family Living Trust dated 01/02/99 Property Tax Parcel ID No. 555666777
Term life insurance 20-year term policy ending in 2030 $200,000 death benefit (no cash value) Monthly premium of $85 John Doe/Jane Doe Policy No. 99999
Checking account Wells Fargo personal checking $20,000 N/A John Doe Acct. No. 55555512
Savings Lakeside Credit Union savings $50,000 N/A Jointly titled with spouse Acct. No. 9999999
Brokerage account Edward Jones brokerage $110,000 N/A John Doe/no beneficiary Acct. No. 333333
Vehicle 2018 Honda Accord $35,000 $20,000 Jane Doe VIN No.: 12345566334J
Furniture Large oval antique mirror $10,000 N/A Jane Doe N/A
401(k) Adobe Inc. 401(k) plan $430,000 N/A John Doe/Jane Doe Acct. No. 988756
Stock certificates IBM stock certificates $85,000 N/A John Doe Certificate Nos. 1234, 9932, 9935
Promissory note Loan to brother-in-law (Charles A. Mooch) $50,000 N/A John and Jane Doe, jointly owned Promissory 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 you think will be helpful to someone who is put in charge of collecting your assets after you have passed away. You might include additional details, such as where the asset is located. For example, if you keep certain items of jewelry in a safe, or a boat you own is stored in dry storage, this would be crucial information to include.

In addition, though you will not share this with your attorney, consider using a software program or other service to store passwords for online accounts or even digital copies of your important documents.

Probate and Your Assets
As you create your inventory, you will review how each item is titled or who is named as the beneficiary on certain accounts, which will enable you to identify those items that will have to go through probate. Probate is the court process that appoints an executor or personal representative to inventory your probate assets and distributes the assets according to state law or the terms of your Will, if you have one. Generally speaking, any account or other asset that meets the following conditions will have to go through the probate process: (a) is owned only in your 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 asset.

Probate can be an expensive, time-consuming, and public process that most people would rather avoid. If avoiding probate is a goal of yours, preparing an inventory well before you pass away can alert you to those assets that will require probate so that you can take steps prior to your incapacity or death to transfer ownership or retitle them.

Additional Benefits of a Complete Inventory
By creating an inventory with the type of information demonstrated in the example above, you can help your loved ones understand next steps with regard to taking control of your assets 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 asset:

  • Assets owned in joint tenancy with rights of survivorship (such as real estate or bank accounts) will pass automatically to the surviving joint owner and outside of a trust or probate.
  • Some bank or investment accounts may have POD or TOD designations that allow those accounts to skip the probate process and be paid directly to a named beneficiary such as a child, spouse, trust, or charity.
  • Life insurance proceeds typically will not have to go through probate if you have properly completed the beneficiary designation form by naming your loved ones, a trust, or a charitable organization as beneficiaries on the policy.
  • Accounts and assets titled in the name of a trust (i.e., owned by the trust) can be distributed outside of probate according to the terms of the trust agreement.
  • Retirement accounts usually require the listed beneficiaries to file a claim with the account custodian before the account 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.
  • Certain items of personal property (e.g., furniture, jewelry, art, collections, etc.), if above the value determined by state law, may be subject to probate, unless they are transferred into a trust before death.

What to Do with Your Inventory Once Created
After creating your inventory, make sure to store a copy where your loved ones will be able to easily find it should something happen to you. Consider the following locations:

  • an estate planning portfolio or binder
  • a file folder that is clearly marked and easily accessible to your loved ones
  • your client file with your estate planning attorney
  • an electronic document format that can be shared with your trusted loved ones online
  • a clearly labeled USB drive in your safe deposit box or safe (as long as you let your loved ones know what to look for, where to find it, and how to access it)
  • your client file with your other professional advisors (so that they can help your loved ones easily identify all your assets if your loved ones call them first after your death)

Once you have created and shared your inventory, you should create a plan for updating it. Over time, accounts get closed or consolidated with other accounts, assets are sold or acquired, stocks get converted to cash, and retirement accounts get depleted. If you do not regularly update your inventory, there is a chance that you could create confusion and send your loved ones down rabbit holes as they try to handle your affairs.

Some people find it helpful to choose a specific date each year when they will review and update their inventory and also review their estate planning documents. Whatever works best for you, make a plan, implement it, and then stick with it. Your loved ones will praise your name for years to come if you do. If you need assistance or have questions reviewing your important documents, feel free to give us a call.