CHAPTER XXXIII INVENTORIES § 272. Importance of Inventory For a number of reasons, the inventory is one of the important records of the estate. The figures shown on it are the basis for the initial entries on the books of the estate. The commission of the personal representative is often based on it and assets transferred by the executor to the trustee are transferred at the inventory value. In his reports to the court as to progress in realizing on the assets of the estate, the personal representative must account for the inventory valuation. Of course, he in no way guarantees that this valuation will be realized, but he is required to account for that valuation either as realized, yet to be realized, or incapable of realization-in other words, loss on realization. As has been said (see § 102), the will sometimes asks that the executor be excused from filing an inventory, but this request results from a mistaken sense of the essentials. There can be no adequate accounting system without the inventory, for this, in a condensed form, makes the substance of the first entry in the books of account. In most states an inventory is required by law as an adjunct of the inheritance taxation. When any transfer tax is to be paid, it is of course necessary that an inventory be drawn up, and for many reasons it is desirable that the executor prepare an inventory and file it with the court. An inventory fixes prima facie the number and the value of the estate's assets, and any person who claims that estate assets were omitted from the inventory or were incorrectly valued in it, has the burden of establishing the truth of his claim. If no inventory were filed, such a person could put upon the executor the burden of establishing the fact that the executor had accounted for all the estate assets at their true valuation. § 273. The Inventory the Basis of Accounts The inventory of the personal property of the estate is the basis on which all the accounts are established, although frequently the accounts must be started before the inventory can be completed. In the form of report adopted by many states the expression used is that the "accountant charges himself" with the amount of the inventory. It must be understood that in this instance the word "accountant" is not used in the professional sense, but rather in the sense of the person who is making an accounting for his stewardship to the court. He charges himself, as executor or administrator of the estate, with the responsibility for the ultimate delivery to the heirs of the realization value of the amount of the inventory. It seems almost needless to say that the administrator is not personally the gainer by any realization in excess of the valuation given on the inventory, as this is profit on realization and is the property of the estate. § 274. Time of Filing Inventory The inventory must usually be submitted within three months of the date of qualification of the personal representative, but it is always wise to prepare and file it as soon as is possible. The personal representative is not always able to submit a complete schedule within the legal time limit, as assets may be discovered even long after the affairs of the estate have been wound up. In the case of the discovery of further assets during the administratorship, the personal representative becomes liable for a proper accounting for the additional values, although in most states he is not required to file additional inventories. It is usually the duty of the executor or administrator to prepare and file the inventory. In New York he may have appraisers appointed by the court to appraise the assets. It is simpler in New York to let the transfer tax assessor make the entire inventory and appraisal. In Massachusetts, on the contrary, the executor or administrator must prepare a full and complete inventory within three months after appointment and file it for the tax commissioner to base the tax assessment upon it. The general rules in Massachusetts are as follows: The inventory is in two parts, one dealing with real estate, and the other with personal property. The schedule of real estate should include all of the real estate which the deceased owned within the commonwealth. The schedule of personal estate should include all personal property situated within the commonwealth, such as goods, chattels, claims, money in the bank, stock, bonds, etc. So far as practicable each item should be listed and appraised separately. In the matter of household furniture, clothing, bric-a-brac, etc., it is not customary to list all the articles separately, but to value them in a lump. This practice should, of course, give way in any case where the individual pieces of furniture or jewelry are of unusual value; also any articles specifically bequeathed by the will should be separately appraised. In ordinary cases, however, a general value set upon such articles in a lump will be sufficient. It is very important, under the inheritance tax law, that the appraisal of bank deposits, notes, claims, etc., should include interest up to the date of the death of the deceased. Also, the value fixed should always be the value as of the date of the death of the deceased. Ordinarily, real and personal property situated in another state or country need not be included in the inventory, although the Tax Commissioner may require information concerning it. Goods or money which chance to be in the possession of the deceased at the time of his death, In each state the special procedure and forms would have to be followed. § 275. Inclusion of Real Estate The general adoption of laws imposing transfer taxes (see Chapter XXIX) has made desirable many changes in the ordinary procedure in regard to inventories. The old rule in most states was that the inventory should include only the personal property of the decedent, because the real property passed under the law, without the intervention of the executor, either to the devisees or to the decedent's heirs if he made no disposition of it by will. Some states, however, require that the realty be separately inventoried, especially in cases where a will provides that it or the proceeds from its sale are to pass to the executor to be held in trust (compare § 274), but not all such states require the placing of a valuation on the real property. But as all state and federal inheritance tax laws require that real estate be included in the inventory, it is necessary to include the values in all schedules for this purpose. The determination of this value can most conveniently be made at the same time and by the same officers as make the other appraisals, and the inclusion of the real estate in all inventories tends to completeness of the records. § 276. Inclusion of Accruals In some states it has been considered proper to include in the inventory the accrued income to the date of appraisal, but this is nowhere required and is not a good practice, as it causes an additional complication. On the contrary, because of the transfer tax laws, it is proper to include accrued rent, inter 'Newhall, Settlement of Estates in Massachusetts, p. 57. est, and similar items, only to the day of death. The federal regulations require that all such accruals to date of death be shown in the return for estate tax : Rent which has accrued upon real property at the time of the decedent's death, whether then payable or not, is included in the gross estate. The amount of interest accrued upon bonds on the day of death, whether payable then or subsequently, should be included. All matured coupons, whether presented for payment or not, should be included.' $277. Assets of No Value or Doubtful Title If the personal representative should find among the assets of the estate a security which he knows to be valueless, he must still include it in the inventory. It is property of the estate, and must be inventoried and retained. It may later become valuable, in which case he will have to account for it. The appraised value of an asset considered absolutely worthless should be shown as "No Value." If the court orders the representative to distribute such an asset, he should make the proper entry in his books of account, although the entry will show no money values. The value of notes or other claims held by the decedent should be included, though they were canceled by his will or appear from their dates to be barred by the statute of limitations. (See § 296.) Assets the title to which is uncertain should be included in the inventory "on their merits," stating all the known pertinent facts, and leaving the question of ownership to the court. Such assets may include securities found in the possession of the decedent but standing in the names of other persons, joint deposit accounts, articles on which it will require the court's decision to settle whether they are personalty belonging to a tenant or fixtures attached to realty, etc. * Article 15 of Regulations 37, Bureau of Internal Revenue. |