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Inventory and Appraisal


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                <p>At the most basic level, the inventory is the list of
the assets of the probate estate. It is a tool with two main
purposes. It gives notice to the interested persons of the items that
are part of the estate (and, if not listed, what is not part of the
probate estate<a rel="nofollow"
href="http://www.articlesbase.com/#_ftn1">[1]</a>).  The inventory
also provides the probate court with the information necessary to
calculate the inventory fee.</p> <p>Within 91 days of the appointment of
the personal representative, the information necessary for the
computation of the inventory fee must be submitted to the court. See
MCL 700.3706 and MCR 5.307.</p> <p>Note that not all inventories must be
filed with the court. In unsupervised administration, it is permissible
to submit the inventory for review by the court. The inventory fee will
be determined and the inventory will be returned without filing. An
inventory that has been submitted but not filed must be sent to "all
presumptive distributees and to all other interested persons who request
it." MCL 700.3706(2)Â The proof of service (PC 564) should be kept and,
as appropriate, filed with the court.</p> <p>The amount of the inventory
fee is set forth in MCL 600.871. The inventory fee must be paid before
the final account is filed or one year from the commencement of the
estate, whichever occurs first. Especially with illiquid estates (like
where you can't get the house sold), this timeline can pose a problem.Â
Wayne County Probate Court is dealing with this problem by having the
personal representative sign an Inventory Fee Acknowledgement and
Extension to Pay form (WCPC 380). A number of probate courts throughout
the state include inventory fee calculators on their websites. Simply
enter the amount of the inventory and the fee is calculated.</p> <p>Form
PC 577 should be filled out and submitted to the court in order for the
personal representative’s obligation to be satisfied. If you
represent the initial personal representative, the inventory includes the
value of both real and personal property at the time of the decedent’s
death. Subsequent personal representatives will need to file an
inventory as well. These inventories will be valued as of the date of
the subsequent personal representative's qualification to serve.</p>
<p>Preparation of the inventory may require having appraisals done,
contacting investment companies or banks, looking up blue book prices for
cars, and/or having the personal representative go through the
decedent’s personal belongings and report anything of high value. The
Instructions for Form PC 577 provide list of items that should be
submitted to substantiate an asset's value.</p> <p>It is important to
make sure that all the inventory items are listed with enough detail.Â
With bank accounts, the account number as well as the address of each
financial institution must be listed. If the value of the property is
determined by an appraisal, make sure the appraiser’s name and address
is included, as well as a legal description of the real property or a
detailed description of any personal property.</p> <p>The value of stocks
for inventory purposes is the average high and low value on the day of
death, multiplied by the number of shares. There are several web sites
that can help you find this information.</p> <p>Real property is included
on the inventory list as long as it is not held as joint owners or
entireties property. Make sure that with all real property the commonly
known name is listed and that the legal description and tax ID are
included. Even though you should note any encumbrances on the property,
you cannot reduce the value on the inventory according to Michigan Court
of Appeals decision <em>Estate of Wolfe-Haddad v. Oakland County</em>,
725 NW2d 80 (2006)<em> </em>. The value of real property for the
inventory is determined by either doubling the state equalized value
(SEV) value or by an appraisal. The SEV should be from a recent
property tax bill. Though an appraisal is more expensive, with the
declining market it can be a lot more accurate.</p> <p>Personal property
generally has little value to the estate. It should be included on the
inventory but the amount attributed to it should be nominal. Some
practitioners do not include the tangible property on the inventory
unless it has significant value. If there is truly something of value
in the inventory, it should be appraised.</p> <p><strong>ACCOUNTING AND
TAX CONSIDERATIONS</strong></p> <p>According to MCL 700.3703(4), the
personal representative must give an annual account of all the receipts
and disbursements until the estate is fully distributed. This account
must be served on all the interested persons in both supervised and
unsupervised estates and must be filed with the court in supervised
estates.</p> <p>In supervised estates, the format of the accounting must
comply with the format requirements of MCR 5.310(C)(2)(c). Because you
never know when you’re going to need the account to be approved by the
courts, even in an unsupervised estate, it is always good to follow the
format rules regardless of the type of estate. Account of Fiduciary
forms (PC 583 or 584) help you comply with these rules.</p> <p>The top of
the Account form identifies the probate court, the number of the account
(1st Annual, Final, Interim), the case number and the case caption.Â
These details should be completed with care.  The account period runs
from the date the Letters of Authority were issued and can be for no more
than one year per account.</p> <p>After filling in all the basic
information about the estate and the personal representative, you must
first enter the beginning balance. On a first accounting, this will be
the inventory amount. If it is a second or subsequent accounting, the
beginning balance will be listed as the assets remaining at the end of
the first or immediately previous accounting.</p> <p>After figuring out
the beginning balance, it is necessary to account for any income in the
accounting period in Schedule A. Both the source and the amount
received have to be included. If the name of the source makes it
unclear as to what the nature of the income was, it is usually good
practice to put a general description. The income listed in Schedule A
does not include any newly found assets. Such discovered assets must be
included in an amended inventory.</p> <p>Next, you must account for all
of the expenses during the accounting period in Schedule B. Expenses
include any administrative costs, any creditors that were paid,
attorney’s fees that were paid, expenses of the personal representative
that were approved and paid, and any distributions to the
beneficiaries. Be sure to include the name of the creditor or
individual and the amount that was paid. This section does not include
any losses from assets listed in the inventory that were sold off.</p>
<p>Transparency in how the funds were spent is key. Written support for
the disbursements is the best way to get your account accepted by the
court and the interested persons. The court will require a summary of
legal, accounting and fiduciary fees. The bills for these services
should include what services were performed, by whom, how much time was
expended for each task and the billing rate for each task.</p> <p>The
next section, Schedule C, is where you account for any gains and losses
in the sale of assets. For example, if a stock was liquidated during
the accounting period the value at the time of death (from the inventory)
and the value that it was liquidated for must be entered. A total gain
or loss for that asset is then calculated. After all the assets are
entered, the net gain or loss is calculated. If there is a net gain, it
is entered in Schedule A. If it is a net loss, it is entered in
Schedule B. If no assets are sold or need to be accounted for, it is
acceptable to use the Short Form, PC 583, rather than the Long Form PC
584.</p> <p>In Schedule D, all the assets that remain in the estate are
accounted for. For example, if there is a house or car that has not
been sold yet, it should be listed. Also any bank accounts and the
value at the time of accounting must be listed. The description and the
value (with the possible exception of bank accounts), should be the
inventoried value, not the market value at the time of accounting.Â
Attorney fees and fiduciary fees incurred during the accounting period,
whether paid or not, must also be recorded on the form. A written
description of the time spent and services performed must be attached.Â
If an attorney is acting as the personal representative it is important
for them to separate their time between fiduciary responsibilities and
legal services.</p>       <!--INFOLINKS_OFF-->

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<p>It is important for the fiduciary to be aware, from the beginning of
the administration, that if he or she wants to be paid for the work
performed, the fiduciary must track his or her time in detail. Also, it
is always good to explain to the personal representative that the more
organized he or she is with the receipts and accounting, the less
attorney fees will be incurred while filling out the accounting forms.Â
It will save both time and money in the long run if the staff does not
have to track down a missing expense or income source or spend time going
through shopping bags full of disorganized receipts.</p> <p>The estate
must send a copy of the accounting to each beneficiary if he or she has
not received that beneficiary's full share. One the share is paid in
full, the personal representative is no longer to provide that
beneficiary with future accounts. Regardless of whether the estate is
supervised or unsupervised, proof of service should be filed with the
court. It may be desirable to have the Probate Court approve the
account each year.</p> <p><u>Tax Issues</u></p> <p>Early in the
administration, the personal representative should obtain an Employer
Identification Number (EIN) for the estate. The estate is a separate
taxing entity and should therefore have its own EIN. The decedent's
social security number should no longer be used for tax reporting. An
EIN may be obtained by mail, phone (800.829.4933) or on the web
(irs.gov). If obtained by phone or web, the EIN will be issued
immediately. A Notice Concerning Fiduciary Relationship (IRS Form 56)
should also be filed with the IRS.</p> <p>The personal representative
must remember that state and federal income taxes still must be filed for
the final year of the decedent’s life. This can be done on a standard
1040. Remember, this is only income that was earned by the decedent
before his or her death. A surviving spouse may elect to file this
final return as a joint return. If the personal representative files
this final return, the decedent's death should be made plain on the top
of the return. Be mindful of filing deadlines and if necessary obtain
an extension of time to file.</p> <p>If the estate has gross income of
more than $600 in a year or any taxable income the estate must file a
fiduciary income tax return. This return is filed on IRS Form 1041 for
the federal return MI-1041 for the state return.</p> <p>It is important
to do an early analysis of the estate to determine the estate tax
liability. If the gross estate is in excess of the then applicable
estate tax exemption amount ($2 million for 2008, $3.5 million for 2009,
no maximum for 2010 and $1million for 2011), an estate tax return will
need to be prepared. The forms are IRS Form 706 and MI-706. This
return is due nine month's after decedent's death. An extension of time
to file is available.</p> <p>Especially with larger estates, it might be
in your best interest and your client’s best interest to hire an
outside accountant or at least consult with an accountant to make sure
that all the forms are filed correctly and timely. Do not be afraid to
admit when you are over your head.</p> <p><strong>PROBATE CLOSING
FORMS</strong></p> <p>Before closing the estate it is important to make
sure that all the administrative duties have been completed. All of the
creditors and taxes must be paid off or otherwise addressed. When this
is done, do a final accounting using PC 583 or 584, serve it on the
beneficiaries of the estate who have not received his or her complete
share, and file a Proof of Service with the court. The process for
completing the final account is as described previously. The "Final"
box at the top of the form should be checked. Unlike prior annual
accounts, assuming assets in the estate, the ending balance will be
$0.00.</p> <p><u>Distribution</u></p> <p>The personal representative has
authority to make distributions from the estate as partial distributions
during the course of the administration and at the conclusion of the
administration. If proceeding in unsupervised administration, court
approval of such distribution is not required.</p> <p>If proceeding in
supervised administration, court approval must be sought prior to any
distribution. See MCL 700.3504 and 700.3505. The personal
representative should petition the court for approval of the proposed
distribution. Notice of Hearing (PC 562) and Proof of Service should be
sent to all interested persons. The parties can execute waivers and
consents (PC 561) to expedite the process and perhaps obviate the need
for a hearing.</p> <p>Be careful when making partial distributions.Â
Once the funds flow out of the estate, it may be difficult or impossible
to retrieve the funds from a beneficiary if additional costs or expenses
are incurred by the estate. The personal representative does have
authority to seek recovery of estate assets improperly distributed to an
heir, devisee or creditor. See MCL 700.3911. It is the better
practice to be cautious in making distributions.</p> <p>When
distributions are contemplated, the personal representative may give the
recipients notice of the intended distribution. Providing written
notice of the type and scope of the distribution puts the recipients on
notice and if he or she objects to the distribution, such objection must
be given in writing to the personal representative within 28 days. See
MCL 700.3908. If there is disagreement about the distribution proposed,
the parties can reach an agreement to alter shares. See MCL
700.3914</p> <p>The preferred method for distribution is an "in-kind"
distribution. See MCL 700.3906. That is, distributing the assets of
the estate in the form in which the estate obtained them. This is true
whether the assets are cash, stocks, bonds, vehicles, business interests
or real estate. If the recipients of the estate do not want to receive
certain assets owned by the decedent, they will be sold as part of the
administration with the proceeds distributed. In the current economic
conditions, inability to sell the real estate may delay the conclusion of
administration. In those circumstances, the beneficiaries sometimes
elect in kind distribution of the real estate so that the estate may be
closed and the real estate sold outside of the estate.</p> <p>When
distributions are made, it is important that the personal representative
receive signed acknowledgement of the receipt of the distribution. This
acknowledgement is most easily obtained using the Receipt of Distributive
Share form (PC 588). This form can be modified to accommodate different
kinds of distributions. It does not need to be limited in use to
distributions of tangible property.</p> <p><u>Informal Closing</u></p>
<p>The personal representative's signature must be notarized.</p> <p>The
interested persons have 28 days to object to the closing of the estate.Â
After 28 days, a Certificate of Completion (PC 592) may be obtained.Â
The estate is then complete.</p> <p><u>Formal Closing</u></p> <p>If the
estate administration is a supervised administration, it must close
formally.</p> <p>Formal closing is accomplished by filing Petition for
Complete Estate Settlement. If a will has already been formally
adjudicated then PC 593 is used. PC 594 is used if the decedent died
intestate or if the will has not been adjudicated previously with the
court. It is advisable to include a Schedule of Distributions and
Payment of Claims (PC 596) and the final account with the Petition.Â
Once the hearing is set, send these pleadings, a Notice of Hearing and
Proof of Service to the interested persons (the devisees of a testate
estate, heirs unless there was a previous adjudication of testacy,
claimants, and any other persons whose interests are affected by the
relief prayed for). An proposed Order for Complete Estate Settlement (PC
595) for the judge should also be submitted with these pleadings.</p>
<p>If the petition requests discharge of the personal representative
(which it almost always should), be sure that the inventory, accountings,
notice of appointment, notice regarding attorney fees, notice of spousal
election and allowance, affidavit of publication to unknown creditors, a
statement that all Michigan estate taxes have been paid or that no
federal estate tax return was required to be filed for the decedent and
any proofs of service are all filed with the court.</p> <p>If you can
obtain Waivers and Consents from all of the interested persons, you may
be able to avoid the need for a hearing.</p> <p>After the hearing,
assuming all goes well, the court will enter the Order for Complete
Estate Settlement. Parties have 28 days after entry of the court's
order to file a motion to set aside the order. Once that time passes,
the parties are barred from contesting the matter, the personal
representative is discharged and the estate is concluded.</p> <p>If the
estate has not been completely distributed, the personal representative
will need to present proof of the distributions and seek an Order of
Discharge (PC 597). Each beneficiary should sign a Receipt of
Distributive Share (PC 588) which could be filed with the court.</p>
<p><strong>ANCILLARY ADMINISTRATION</strong></p> <p>A full probate
procedure is not usually necessary for a non-resident who simply held
property in Michigan. The appointed personal representative in
decedent’s domicile state, called the foreign personal representative,
can usually take care of the matters as long as a local administration is
not pending in Michigan. 63 days after the decedent’s death, a person
holding property belonging to the decedent can turn the property over to
the foreign personal representative and be released of liability. The
foreign personal representative must present proof of the domiciliary
personal representative's appointment and a sworn statement made by or on
behalf of the representative stating (1) the date of the nonresident
decedent's death (2) that local administration, or an application or
petition for local administration, is not pending in Michigan and (3)
that the domiciliary foreign personal representative is entitled to
payment or delivery of the property. See MCL 700.4201 and 700.4202.</p>
<p>Notice of Ancillary Administration Filing, PC 619, is used if the
foreign personal representative needs to do more than collect money and
the decedent’s property. For example, if the foreign personal
representative needs to sell a piece of real property. This form must
be filed with the court and it gives the foreign personal representative
the power of a local personal representative without actually opening an
estate in Michigan. These powers are set forth in MCL 700.4203 and
include the power to execute deeds and discharge mortgages. This does
not result in local administration or local appointment of the personal
representative. By filing the Notice of Ancillary Administration Filing
with a Michigan probate court, the foreign personal representative does
submit to the jurisdiction of the Michigan court for estate related
matters.</p> <p>If an application for local administration is entered,
the local powers of the foreign personal representative are terminated
and a local personal representative is appointed. The administration in
the decedent’s domicile then has no bearing on the Michigan estate
administration.</p> <p>If the estate that you are administering here in
Michigan has property located in other states or countries, it will be
necessary to seek the assistance of counsel licensed in the other
jurisdiction. There are many attorneys in Michigan who are licensed in
multiple jurisdictions. They may provide a nearby solution to probating
property at a distance.</p> <p><strong>MISCELLANEOUS FORMS</strong></p>
<p>In theory, uniformity of practice suggests that the probate practice
should be identical from one part of the state to another. But as Yogi
Berra said, "In theory there is no difference between theory and
practice. In practice there is."Â This section is aimed at highlighting
some differences of approach across some of the probate courts in our
state.</p> <p><u>Petition for Approval of Sale of Real Estate</u></p>
<p>A Petition for Approval of Sale of Real Estate (PC 646) only needs to
be filed if court approval is required to dispose of real estate. For
example, if the Letter of Authority gives the personal representative
restricted powers, this pleading will most likely have to be filed,
served on the interested persons, and a hearing will be held (unless
waivers and consents are obtained from all interested persons). If the
personal representative’s powers are unrestricted this step is not
necessary. When filing the pleading, remember to include a tax
assessor’s statement with the SEV and a copy of the Purchase
Agreement. Wayne County Probate Court has a slightly different form to
be used.</p> <p><u>Notice of Continued Administration</u>Â </p> <p>If an
estate is unable to be closed within a year of the appointment of the
personal representative, a Notice of Continued Administration (PC 587)
must be filed within 2 months of the estate’s anniversary. It also
must specify why it is necessary to continue the administration. For
example, assets may still need to be disposed of and distributions
made. This form must be served on all interested persons. Some courts
accept these notices with little difficulty. Others are much more
demanding in the rationale for keeping an administration ongoing.</p>
<p><u>Information Changes</u></p> <p>It is very important for the courts
to have current and accurate information about the personal
representatives (and the attorneys for that matter). Wayne County and
Oakland County both have specific forms that need to be filled out. In
Wayne County, there is a Change of Address form. In Oakland County
there is a Fiduciary Information Form (PEMH 1018) that must be filled out
and can be found on the Oakland County Probate Court’s website
(http://www.oakgov.com/probate/form_application/).</p> <p><u>Other Wayne
County Probate Court Forms</u></p> <p>An Affidavit Regarding Whereabouts
of Certain Interested Persons (WCPC 23) can be filed with the court if a
beneficiary or heir cannot be found. This is more often used in
unrepresented estates, but can also be filed by attorneys. There is
also a Testimony Interested Parties for a Wrongful Death case (PC 09).Â
It is slightly different than a SCOA Testimony Interested Persons. It
does not need to be filed. It can be useful to determine parties
entitled to take under a wrongful death case.</p> <p><u>Other Oakland
County Probate Court Forms</u></p> <p>A Petition and Order for Discovery
Estate Not Exceeding $15,000 is available in Oakland County. This
allows a person with a relationship to the decedent to obtain bank and
property records, assuming the estate is less than $15,000. This form
looks similar to a small estate affidavit but it is used to gain
information about the decedent's bank accounts.</p> <p>There is also a
Request for Extension of Time for Compliance (PEMH 1063). This form can
be filed with the court if a Notice of Deficiency has been issued against
the fiduciary. If granted, it allows the fiduciary 28 more days to
comply with the notice.</p> <p><u>Other Kalamazoo County Probate Court
Forms</u></p> <p>Kalamazoo County has a separate Notice of Intent to
Close that they will send to the personal representative if a continued
administration is not filed (PC 589). After 63 the court will enter an
order administratively closing the estate (PC 599).</p> <p>Be aware that
many pleadings that have to be filed with the court require a filing
fee. The fee schedules for Wayne, Oakland, Macomb, and Kalamazoo County
are included.</p> <p>Finally, attached you will find a chart displaying
degrees of kinship that can be useful in determining heirship.</p> <p><a
rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview',
href="http://www.articlesbase.com/#_ftnref1">[1]</a> Non-probate assets,
such as those that are jointly held or beneficiary designated, are not
listed on the inventory. These kind of assets generally pass by
operation of law and will not be probated. Typical examples of jointly
held assets include real estate or accounts held by husband and wife.Â
On the death of the first spouse, the survivor will receive the asset
without the need for probate. Typical examples of beneficiary
designated assets include life insurance and 401(k) and IRAs.  On the
death of this kind of asset, the named beneficiary will generally receive
the asset directly without the need for probate.</p>                <!--

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