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Marshaling Assets

One of the first responsibilities of the newly-appointed personal representative is gaining access to and placing a value on all of the decedent’s assets. As part of this process, the personal representative is expected to prepare an inventory of the decedent’s belongings, which lists the value of each significant asset as of the date the person died. For many estates, the decedent owned a house, and had a checking and savings account, retirement plan, a vehicle, and personal property. In many other situations, the decedent may have also had life insurance, an annuity, savings bonds, a brokerage account, and weapons. How to handle, gain access, and distribute these assets vary depending on the asset itself, as well as other issues. Below is a general discussion of key issues to be mindful of when gathering these different types of assets.

Retirement Accounts

Typically, retirement accounts (i.e., 401(k)s, 403(b)s, 457(b)s, IRAs) pass to a beneficiary through a beneficiary designation that the decedent made during his or her life. If that’s the case, the retirement account’s plan administrator will not need the personal representative’s letters testamentary. Instead it will only need a death certificate. After that, the plan administrator will contact the beneficiary(ies) and provide them options for receiving the inherited account, which will include rolling the account over into an inherited IRA or withdrawing the funds. The beneficiary should be careful though, because the money in these accounts usually has never been taxed. Therefore, withdrawing the full amount may result in a large tax bill for the beneficiary.

If the retirement account has no beneficiaries listed, then the plan administrator will need the personal representative’s letters testamentary, and will distribute the funds to the estate. This is usually a big problem, and the personal representative should find a CPA familiar with estate tax issues as soon as possible if a retirement plan has no beneficiaries listed. If the estate is forced to pay taxes on the funds distributed to the estate, a significant amount will be paid in taxes. An experienced CPA can usually help reduce the harmful impact of this situation by passing the tax burden to the beneficiaries of the estate who will likely have a lower tax rate. But, again, it is important to find a CPA soon after the estate is open to discuss your options.

Stocks

Many people own shares of individual stocks, which are either in the form of paper certificates or in electronic form. If this is the case, the personal representative will first need to determine whether the stock certificates were designated to go to someone through a transfer-on-death designation. If so, then that designee is the only person who can transfer the certificate into his or her name. This can be done by contacting the transfer agent for the stock, providing the transfer agent with a death certificate and completing the appropriate paperwork.

If the stock certificates are not designated to go to someone through a transfer-on-death designation, then the personal representative will be responsible for transferring the stock certificates into the estate’s name. To do so, the personal representative needs to contact the transfer agent. Computershare is a transfer agent for many stocks. So, if you don’t know who the transfer agent is, you should start there. The transfer agent will require the personal representative to complete paperwork, provide a death certificate, and obtain a “medallion signature guarantee” on its documents. This medallion signature guarantee can be obtained at many banks and other financial institutions. After sending the completed paperwork into the transfer agent, the transfer agent should notify you when the transfer has been processed so you can liquidate the stock holdings or transfer the shares to a beneficiary of the estate.

Vehicles

To transfer a vehicle into someone’s name, the personal representative can visit a local Department of Motor Vehicles office where personnel can help with the transfer. The personal representative should bring the following documents: an original death certificate, the title to the vehicle, and the original letters testamentary. When selling a vehicle through Craigslist or other private method, the personal representative can sell the vehicle directly from the estate by filling out the sales information on the physical title, completing a bill of sale and giving both to the purchaser. The personal representative would sign the title as “personal representative” of the estate, and then report the sale soon thereafter online at www.dol.wa.gov.

Personal Property

Personal property can often have little value, but be one of the most difficult issues to manage in a probate. In ideal situations, family members can decide what personal belongings each person wants, and can decide how to dispose or donate the rest. When disagreements arise, the personal representative may need to devise an appropriate method for dividing family mementoes, such as a lottery or by “drawing straws.” For valuable personal property, such as jewelry, art and tools, the personal representative may need to obtain valuations or appraisals to reflect the correct value of the item and to divide the valuable assets equitably between the heirs.

Real Property

Real property refers to a home and/or land the decedent might have owned. If the decedent owned real property, the personal representative should make sure that it is secure and insured. Securing the property might include changing the locks if there are concerns that an unauthorized person may have a key. Insurance is important because a fire or other damage could significantly impair the value of the property.

In most cases, the personal representative will sell the real property from the estate to a third party. When selling the property, the personal representative should retain a licensed real estate agent who will list the property on the multiple listing service. The personal representative is expected to get the maximum value for the property. Selling it yourself or to an “insider” will likely not get the maximum value, and therefore could constitute a breach of the personal representative’s fiduciary duty. Instead of selling the property, sometimes a beneficiary of the estate will not want the property sold and instead wants to take the property as part of his or her distribution from the estate, and this is fine. If the personal representative has nonintervention powers, he or she has the power to allow this or not. But whether the personal representative is selling the property or transferring it to a beneficiary, it is important that the transfer documents are properly prepared. If you are not familiar with real estate deeds, you should not attempt to prepare the deed yourself. You should get help from an attorney. Or, at the least, have escrow complete the transfer documents if you are selling the property.

Financial Accounts

Financial accounts could be bank accounts or brokerage accounts. If these accounts were titled as joint accounts with another person, or the decedent designated the accounts to pass at death to another person (i.e., a “transfer-on-death” designation), then the personal representative will likely have little power over these accounts. Instead, the bank or brokerage house will contact the person who is the joint owner or the transfer-on-death designee and discuss with them how they can obtain the funds directly.

On the other hand, if there is no joint owner and no transfer-on-death designation, the bank or brokerage house will need a death certificate and letters testamentary from the personal representative. Once they have those documents, they should allow the personal representative to withdraw the funds. They will likely give the personal representative a check or offer to open an estate account where they will place the funds. In some situations, especially with brokerage houses, the institution will require the funds to be placed first into an estate account.

Life Insurance and Annuities

Typically, life insurance policies and annuities pass to the beneficiaries that the decedent designated in the policy. If that’s the case, the life insurance company will not need the personal representative’s letters testamentary. Instead, it will only need a death certificate. After that, the life insurance company will contact the beneficiary(ies) and provide them options for getting the life insurance proceeds. If the insurance policy has no beneficiaries listed, then the insurance company will need the personal representative’s letters testamentary, and will pay the funds over to the estate where it will be distributed according to the decedent’s will or the intestate law if there is no will.

Savings Bonds

For decedents who had savings bonds, the process for redeeming the bonds and distributing them vary depending on whether they are paper bonds or electronic bonds. Either way, the personal representative should review the Treasury Direct website and find the page applicable to the particular situation. But generally, if the bonds were paper Series EE savings bonds, they can be redeemed at many local banks. If that doesn’t work, you will need to complete a Form 1522 and follow the instructions on the Treasury Direct website. If the bonds are in electronic form, the personal representative will need to contact the Bureau of Fiscal Services for information on how to proceed.


Preparing the Inventory

Within ninety days of the beginning of the probate, the law requires the personal representative to prepare an “inventory and appraisement” of the estate. The inventory includes a list of and values for the more significant pieces of property of the estate. The inventory should be broken into six categories: real property, stock and bonds, debts owed to the decedent, bank accounts and money, furniture and household goods, and other personal property that might include partnership interests. The values provided in the inventory must be as of the date the decedent died.

The value of some of the property can be easily determined. For example, the personal representative can review bank statements to determine the date-of-death value of bank accounts. Brokerage accounts can be more challenging because of the fluctuating value of stocks, but the brokerage house should be able to provide a date-of-death value upon request. Valuing a house and land can be accomplished through an appraisal or opinion of value letter from a real estate agent. For life insurance policies and annuities, the personal representative can request the insurance company complete a Form 712, which provides the value of the policy.  

Typically, the personal representative need not include incidental personal property, such as silverware, pictures, etc. in the inventory. But more valuable personal property and furniture, such as jewelry, artwork, valuable tools, and instruments may need to be included. The degree of specificity is often driven by whether the heirs and beneficiaries are getting along, and whether the estate is taxable, which requires a more precise valuation of each asset.

There is no requirement that the inventory be filed with the court. It is, however, still a document that needs to be completed prior to the completion of the probate, and it must be provided to a beneficiary within 10 days if it is requested. The inventory can also be helpful later in providing a “cost basis” for real property, in cases where a beneficiary holds onto a house or land instead of having the estate sell the property during the probate process.


Estate Bank Accounts

In most situations, a personal representative should open an estate bank account. The estate bank account is a place where financial assets can be placed. It also provides a place where bills can be paid from. The account provides a nice record of all of the financial assets that have come in and out of the estate during the estate’s administration. In most situations, a personal representative should not deposit the estate’s financial assets into his or her own bank account. This looks very suspicious and can get the personal representative into trouble. An estate bank account can be opened at any bank the personal representative chooses. The bank will typically need to see the letters testamentary and the death certificate. You will also need a tax ID number for the estate. Visit the Taxes page of this website for instructions on how to get a tax ID number.