Identifying the Estate Assets

Once probate is open and the notices of appointment have gone out, the personal representative must then complete an inventory of the assets of the decedent. In addition, the personal representative should locate and secure all of the assets.

The first step in completing the estate inventory is to thoroughly review the applicable statutes including RCW 11.44 and all relevant subparts. The inventory should include all property and interests related to the estate. This includes, for example, real property, personal property, vehicles, jewelry, funds located in bank accounts, investment accounts, insurance and retirement benefits, military benefits, business interests. These include those the decedent owned outright and those in which they owned a part interest.

An example of an inventory appropriate for filing with the court can be found here.

Estate Asset Deadlines

The preliminary estate inventory is required to be compiled by the personal representative within 90 days of appointment. Although the inventory is not filed with the court in every probate, it is important to keep an up-to-date list of all of the decedent’s property. In the event an interested party requests that the personal representative provide an inventory, the personal representative has ten days to provide one.

Types of estate property

As discussed, the estate inventory should identify all of the decedent’s property and include an approximate value of each item as of the date of the decedent’s death. On occasion, it will be necessary for the personal representative to obtain an appraisal for specific property and have these available. The inventoried property should be assigned into the following categories:

  • real property
  • stocks and bonds
  • mortgages
  • notes
  • other written evidences of debt; and money
  • furniture and household goods; and
  • all other personal property.

Note, that while there are sections for all types of property, it is often not necessary for the personal representative to list every single item the decedent owned. For small items, an entry on the inventory identifying a collection of property would be appropriate. For example, “various kitchen appliances and dishes valued under $500.00” could be an appropriate inventory entry. When in doubt, err on the side of detail and accuracy.

Note: Create a body of evidence to demonstrate the existence of assets, verify values (e.g., bank statements, investment statements or letter from the investment company).

Note: when inventorying estate owned vehicles (e.g., automobiles, trucks, motorcycles, boats, trailers, jet skis. etc.) include a description including make, model, manufacturer, identification numbers and value. It is helpful to locate original titles or order replacements.

 Note: It is the personal representative’s responsibility to locate and secure estate property. In the case of real property, always obtain correct and sufficient insurance coverage to protect the asset and guard against potential liability. Consult your probate attorney and insurance agent to insure this occurs.

A. EIN

After the personal representative has opened the estate, he or she must create an Employee Identification Number (EIN) for the estate. This number acts as a unique tax identification number with the Internal Revenue Service.

Although it is called an Employee Identification Number, you may find it easier to remember it as an Estate Identification Number. To create an EIN for an estate, follow this link.

To complete the process, the personal representative will need: the decedent’s full name and social security number, the personal representative’s own social security number, the letters testamentary or letters of administration, and the jurisdiction information for the probate (state and county). Full instructions for completing the EIN process can be found here.

B. Fiduciary Duty of Care

It is critical that the personal representative keep in the forefront of their mind that they owe a finical duty care to all interested parties of the estate. The appointed personal representative has sworn an oath that they will uphold this duty and adhere to the responsibilities of the position. The personal representative should consult with an experienced probate attorney to fully acquaint themselves with these responsibilities. Many statutes describe and govern the financial duty of care. A selection of these include:

 

A perspective Personal Representative should also review these statutes, at the very least:

Please see this page, for a discussion regarding fiduciary duty of care.

C. Accessing the Decedent’s Bank Accounts

Generally, the personal representative can access the decedent’s bank account by going to the bank in person. The personal representative shows the bank teller or manager the original letters testamentary or letters of administration, along with a valid photo I.D. Upon being presented with these documents, the bank will usually provide the personal representative with a check for the decedent’s balance made out to the estate. It is always helpful to obtain, and have available, a certified copy of the decedent’s death certificate.

Note: You can obtain a copy of the decedent’s death certificate through the Washington State Department of Health or at the local county health department.

If the bank does not cooperate, the personal representative may need to draft a letter of instructions to the bank. In the letter, the personal representative must identify the decedent, the probate jurisdiction and cause number, and provide the bank with a copy of the letters testamentary or letters of administration, along with a copy of the decedent’s death certificate. The institution will want originals of these documents. In this letter, the personal representative should use language similar to “I am instructing you to provide me with the funds from [Decedent’s name]’s account(s), and close those account(s).” The bank will not be able to ignore the personal representative’s request when contacted in this manner. The same method(s) can be used to contact other financial institutions, including investment firms, in order to accurately ascertain the composition of estate assets.

Sometimes, the personal representative may not be aware of the location of all the decedent’s accounts. Consultation with family members, friends and a thorough review of the decedent’s records, mail and similar materials are often revealing. Another option, is for the personal representative to create a letter of instructions, as described above, requesting financial institutions to respond with any information related to any accounts the decedent may have held with their company and send these to all relevant institutions as part of a due diligence discovery process. In addition, there are professionals for hire that will conduct asset discovery research on behalf of the estate. Payments for such services are, generally, considered legitimate costs entailed in the administration of an estate.

D. Estate Account

The personal representative of an estate has the duty to secure all of the decedent’s property, which, in many cases, will include one or more bank accounts. In order to uphold this fiduciary duty, the personal representative must keep all of the decedent’s money and property separate from their own. This is important.

In regard to the decedent’s financial resources, this means that the personal representative must, first, open an estate account, using the estate’s EIN number. Then deposit monetary resources into this account and pay administrative costs through this account.

It is good practice for the personal representative use a bank or credit union where they do not have existing accounts and where a minimum balance is not required.

Once the appropriate financial institution is selected, the personal representative must bring a copy of letters testamentary or letters of administration, along with the EIN, to the bank to open an account.

When titling the account, it should resemble the following: Estate of [Decedent’s Full Name], [Personal Representative’s Full Name] as Personal Representative.

Once an account has been established for the estate, all of the estate’s monetary assets should be deposited here. This can include the contents of the decedent’s bank accounts, proceeds from the sale of the decedent’s property, or other funds that belong to the estate. The personal representative may pay the costs of administering the estate from this account, but must carefully track all transactions, including deposits to, and withdrawals from, the account, throughout the course of probate.

E. Estate Expenses

When administering an estate, the personal representative may encounter assessments for costs or fees. These can include the court fee for opening the estate, the cost of hiring a probate attorney, the cost of preparing the decedent’s home for sale, and other expenses of this nature. For costs such as these, that are directly related to the administration of the estate, the personal representative may use funds from the estate account. If there are administration costs from the time before the estate account is opened, the personal representative may also reimburse the person who paid those costs, provided there is adequate reason and a receipt for the cost. The personal representative owes a fiduciary duty to the estate, and it is imperative that the personal representative carefully track these expenses.

Receipts for expenses from personal representative.

RCW 11.76.100 requires the personal representative, in rendering his or her accounts to produce receipts or canceled checks for the expenses and charges the personal representative has paid. The personal representative must file the receipts with the court and these remain with the court until the probate has been completed and the personal representative has been discharged. However, he or she may be allowed any item of expenditure, not exceeding twenty dollars, for which no receipt is produced, if such item be supported by his or her own oath, but such allowances without receipts shall not exceed the sum of three hundred dollars in any one estate. Any time the personal representative seeks to reimburse themselves for administration of the estate, they should always seek, and gain, the approval of the court before doing so.

Administration Costs verses Creditors’ Claims

It is vital for the personal representative to understand the differences between what the law considers “administration costs” and “creditors claims (or debts) against the estate.” Generally, costs incurred after the death of a person are included in administration costs, whereas, expenses (debts) incurred by the decedent prior to death are debts subject to a creditors claim. The personal representative must familiarize themselves with all applicable probate related statutes and/or consult with an experienced probate attorney for the answers to these types of issues. The law will hold the personal representative responsible for their actions taken during the administration of an estate.

Note: The subject of creditors claims is discussed, in more detail, here.

In addition, the personal representative is required to maintain a fiduciary duty of care while completing their probate duties. This is a heightened level of expectation or standard that the personal representative is expected to uphold, including avoiding any self-dealing. See, for example, RCW 11.104A and other applicable statutes. An experienced probate attorney can advise the personal representative regarding their responsibilities and duties.

Note: The personal representative may hire professionals to assist in the administration of an estate, including accountants, attorneys, and similar services. Costs related to activities needed to the administer the estate are considered “administration costs” and paid are for from estate assets.

Reimbursement to Personal Representative for Administration Costs

As discussed, above, once the estate account is opened, the personal representative must keep excellent records indicating the initial balance and all transactions made during the course of probate. As the personal representative uses funds from the estate account, they must, promptly, update the ledger, indicating the amount spent, and describing the purpose of the expenditures. The prudent personal representative saves and organizes receipts for all expenses, and has these receipts available in the event of a court ordered review.

Note: It is the responsibility of the Personal Representative to keep accurate, up-to-date financial records with corresponding evidence for all financial transactions.

Washington probate law, RCW 11.48.050, allows the personal representative to pay for all necessary expenses in the care, management, and settlement of the estate. It is not uncommon, at the outset, that the personal representative will personally incur expenses on behalf of the estate. For example, it may be necessary for them to pay for the initial hiring of a probate attorney in order to seek appointment as the personal representative of the estate. In addition, the personal representative may have paid for funeral arrangements or related expenses. While it is discouraged when estate funds are available, there may be times, after probate is opened, when the personal representative may personally incur expenses on behalf of the estate. In situations such as these, the personal representative is entitled to reimbursement for these costs.

In addition, the personal representative may be entitled to compensation for the time spent administering the estate. When seeking reimbursement, the personal representative must adhere to the procedures described under RCW 11.48.210.

In order to be reimbursed, the personal representative must keep clear records and proof of any personal funds they have spent towards administration of the estate This includes a careful catalogue of all receipts and documentation pertaining to these expenses. The personal representative should always seek, and receive, approval of the court before reimbursing themselves for administration expenses.

In addition to reimbursement of out-of-pocket expenses, the personal representative may also receive compensation for the services they provide to the estate. Under RCW 11.48.210, the personal representative may receive compensation for their services, regardless of whether or not compensation is specified in the will. If the will specifies the amount of compensation to be provided to the personal representative, they are entitled to that amount for their services. If the will does not provide for compensation, the court will review the services provided by the personal representative, and determine a just and reasonable amount.

Note: Any amount of compensation paid to the personal representative for their time spent administering the estate must be determined and approved by the court. A personal representative cannot, unilaterally, decide what compensation they want to be paid for their services.

The personal representative may choose to be reimbursed during the course of the probate of the estate or wait until the end of the probate. Regardless of when the personal representative chooses to seek reimbursement, they must keep a clear ledger of reimbursements made to themselves from the estate, detailing how much was reimbursed, what it was for, and produce a receipt. This information will be compiled and included in the final accounting, at the end of probate.

Whether or not a personal representative anticipates seeking compensation for their time, the personal representative should always keep careful track of all the time they spend in the administration of the estate. This should include concise information related to the date, description, time spent, any associated costs, and receipts for each individual activity. Only by being thorough and accurately tracking time and services rendered, can the personal representative receive compensation for all of their activities. This information can, also, be extremely helpful in reconstructing the actions taken by the personal representative, should this ever become necessary.

F. Additional estate assets

Real property

Once appointed, the personal representative must secure the decedent’s residence and other real property. This may involve changing locks, affixing cameras or an alarm system, or implementing other security methods. In many cases, the home is the largest estate asset, and must be protected, as such. This means that maintaining the appropriate insurance coverage on the home is critical. It also requires that the personal representative make arrangements to keep utilities (e.g. water and heat) operable so as not to incur damage to the property.

Once it is confirmed that the home is secured and insured, the personal representative should promptly inventory the entire contents of the property. This inventory includes all personal property. Some personal representatives find making a video or picture catalogue, in addition to the inventory helpful.

Next, depending on the will or other estate agreements and the status of creditors claims, storage, distribution and/or sale of the personal property is considered. This is especially true where the real property is being prepared for sale.

To ensure a fair value is obtained for the home, the personal representative should contact multiple realtors, and seek their opinions for the best options to list the home. Some may suggest updates or work for the property, while others may suggest selling as-is. By getting multiple opinions, the personal representative can evaluate the options available, and determine what the house is worth, and whether updates might be worth the investment.

When selling real property, hiring a realtor usually makes the process easier. The realtor will likely have relationships with professionals available to assist with the preparation and execution of closing documents. In addition, they may be prepared to recommend the services of a title company, to provide title insurance on the real property. A corrected and/or clear title report, coupled with title insurance, can raise the price for the sale of real property dramatically.

During, and after the sale, the personal representative should keep detailed records of communications with the realtor, offers received, and, once applicable, the sale price of the real property. After closing, the funds from the sale should be deposited in the estate account.

Note, Personal representatives are generally responsible for the actions of their representative agents, including real estate agents. If the estate inventory includes real property, it is prudent for the personal representative to consult with an experienced probate attorney.

Personal Property

All property that is not “Real property” is considered “Personal Property.”

–Investments, Insurance, Pensions, and Final Arrangements.

The personal representative must determine whether there are investment accounts associated with the estate. If there are no designated beneficiaries to these accounts, the estate is, generally, the receiver for these types of assets.

Careful review of the decedent’s mail and other communications may be key in discovering these investments. Under the authority of the letters testamentary, or letters of administration in an intestate estate, the personal representative may contact the broker or agent, and take control of the decedent’s investments.

Once the personal representative has taken control of the investments, he or she must determine whether it is best to sell off the investments immediately, maintain the investment, or exchange it for other property. Under RCW 11.68.090, a personal representative with nonintervention powers has broad discretion in managing the property of the estate.

If the personal representative determines that it is in the best interest of the estate to sell the investment property, he or she may do so, and deposit the proceeds into the estate account. The personal representative must then update the estate inventory to show how much the investment was sold for and appropriate records of all transactions kept.

The same actions apply for all other estate monies and resources related to insurance, pensions and similar assets. Always explore the possibility that the decedent may have made arrangements for the disposition of their remains and final services. These may, sometimes, take the form of a single premium insurance policy, arranged with a funeral home or similar service provider.

Note: In cases where the decedent has designated a beneficiary or beneficiaries, directly, outside the will, those resource accounts are considered “non-probate” assets. The personal representative should include these in the estate inventory but has not duty towards these assets unless the beneficiary predeceased the decedent.

-Business Interests

If the Decedent was involved in the operation and/or ownership of a business, this must be addressed by the personal representative. Washington statutes allow the personal representative to “stand-in” for the Decedent under such circumstances. The proper conveyance and responsibilities of the personal representative in cases involving businesses interests is beyond the scope of this article. It is, generally, necessary to consult with an experienced attorney, accountant and other professionals for advice on how best to proceed.

-Vehicles

Estate assets generally include one or more vehicles. These include automobiles, trucks, vessels, trailers and even airplanes. As with all property of the estate, the personal representative should conduct adequate research to determine the ownership and value of an asset prior to attempting to sell a vehicle or similar estate asset. The Department of Licensing is, often, a first stop to find out what property is in the decedent’s name. Remember to bring a copy of your Letters and the death certificate to demonstrate the personal representative’s authority to run title searches.

Locate and secure all vehicles and record this information to the estate inventory. Make sure to include the make, model, year and vehicle identification number (VIN), as appropriate. Fair market value for the vehicle and its condition should be established. In addition, if there is any type of loan, encumbrance or joint ownership attached to the property, these must be dealt with first before considering any type of distribution or sale.

If any vehicles are, currently, insured, the prudent personal representative considers whether the vehicles should be stored as opposed allowing these to be operated. In addition, if insured, the personal representative should notify the insurance carrier immediately of the probate and that the original owner is deceased.

If the personal representative is probating the estate with non-intervention powers and the disposition of a particular vehicle is not addressed, in the will or other estate agreement, the personal representative may often move towards the sale of the vehicle with the proceeds accruing to the estate.

When selling a vehicle in Washington, there should be a “Bill of Sale” and “Ownership Title” document. The personal representative may transfer ownership, on behalf of the estate, by signing their own name, with the caption “as personal representative of the Estate of [Name of the Decedent].” Doing so makes it clear that the personal representative is signing for the estate and not in their own personal capacity and they have the authority to convey the vehicle. Both, the Seller (personal representative) and the Buyer, should keep a copy of the Bill of Sale. In addition, the Personal Representative is responsible for reporting the sale of a vehicle with the Department of Licensing.

-Additional Personal Property

As mentioned, most estates include other personal property not addressed above. It might be helpful to think of this type of property as the decedent’s “stuff.” This might include an array of property, such as, clothes, electronics, furniture, heirlooms, art, curios, camping/hunting equipment, even pets and plants.

These objects should be included in the estate inventory. The degree of specificity should relate to the value of the individual property. Where it is warranted, a professional appraisal may be secured to determine the value and potential market for particular property.

Assuming the estate costs and debts have been addressed and the property is not disposed of by bequest or other means, in the will, the personal representative will need to consider how to dispose of this property. For some valuable articles, hiring an auction company or a professional to oversee the sale may prove to be helpful. The personal representative should keep careful track of what items are sold, the sale price, and the steps that the personal representative took to determine the value and exercise due diligence. Proceeds are usually deposited to the estate account.

Where the property is of little monetary value, it may be more financially prudent for the personal representative to donate them to local charity, rather than go through the time and expense to attempt to arrange for their sale. A receipt from the donation facility should be obtained. For items of little value, for instance, miscellaneous kitchen utensils, including on the estate inventory “miscellaneous household goods valued under $100.00” is appropriate. The personal representative will, generally, not need to show that they sold each individual item.