Real Life | Managing the estate includes discovery and assembly of items

OK, you’ve survived my intro to the exciting world of estate administration, and now the house is abuzz with activity again as you charge into the project, right?

Also right, nothing can move forward until you know what you’re dealing with, both the provisions of the documents and all of the assets and liabilities. So, while awaiting the state’s letters of administration or personal representative appointment, and concurrently urgently firewalling the financial accounts against hacking and embezzlement, doesn’t it make sense to find out all that there is and to gather it all together?

So, we begin with “Discovery and Assembly.” If you’re lucky, Loved One created an Estate Operators’ Manual, the single-source, easy-access Doomsday File, back when he or she still was lucid, maybe with your wise encouragement and help. Now’s the time when that effort will pay off, big time, because almost everything already is neatly assembled and described in it.

Hear ye: If you haven’t yet done yourself, your family and your fiduciaries the downright phenomenal favor of building yours … Well???

But even with the panacea of the doomsday file, there are bound to be other items to discover and organize. Don’t let anything out of the house, office, car, garage, boat, RV, warehouse, etc., without first thoroughly inspecting it. Used furniture dealers and thrift shop customers love to describe treasures found behind dresser drawers, in inside jacket pockets and under the backseats of cars.

Fortunate is the family who does most of the discovery detective work while the person still is alive and cognizant and can tell them about the many bits of business that need to be taken care of, what to look for and where to find it. Evidence and clues. Even so, sooner or later overlooked, forgotten or subsequent things do surface, so you should search and probe again, anyway.

Look for, and ask about: documents, recollections, artifacts, papers, merchandise — written, scribbled, printed, electronic, verbal or otherwise — in the person’s spheres of personal, business, family, professional, partnership, joint venture and any other relationships that the person might have been involved in. Listen to what people who are reliably “in the know” can tell you, but be careful about their credibility. Be alert for foreign, as well as domestic, interests.

Do detailed detective work to follow leads, examining receipts, canceled checks, photos, paycheck stubs, detailed transaction invoices, etc. Watch for residual assets and benefits lurking in unrelated or merely indirectly related matters. Examples: a contingent liability as guarantor on a friend’s debt, an expected future inheritance, deferred income from sales, year-end dividends, tax refunds and court-awarded judgments resulting from not-yet-completed legal cases. Unearth personal, corporate, agencies’ and trusts’ accounts still alive from very old, forgotten or long-ago-ended relationships.

Even an innocuous little scrap of paper can reveal a significant asset. Marvin found a little Post-it note misplaced between two folders in Alice’s file drawer. It led to a long-forgotten vested pension account with a long-ago employer.

Sure, it’s a lot of work, but worth it, to check out every hint of an asset or liability. Hannah received a notice and, subsequently, a check large enough to have covered a kid’s tuition for a year, from a life insurance company whose new high-tech search software found her two decades after Hal died. Hanna’s confession: “Gee, I thought that policy wasn’t any good anymore.” Now, suppose the company hadn’t been so diligent about tracing long-lost beneficiaries!

In a word, the detective work should look for everything!

We covered an abbreviated list of possible items in my recent “Doomsday File” column, summarized from my prompters lists, hints far too numerous to fit into this column. But I’ll happily send you the prompters on request. It might suggest, or lead you by association to think of, more items.

With luck, some of your discoveries won’t be needed, at least not right away, but well might be later as the estate progresses. If the estate has to file full probate, you’ll need all of them, anyway. So, destroy nothing.

As you go, I think you’ll be smart to watch from the start for information that can help to resolve two vexing challenges that the fiduciaries must resolve sooner or later:

First, valuation. Everything of significant importance has to be assigned a “fair market value” as of the date of death and at time of subsequent sale or transfer. There are several kinds of valuation — accounting and reporting for various purposes. Examples: “small estate” vs. “large estate” for probate purposes, income tax, federal and state estate tax, state inheritance tax and the equitable treatment of legatees. Your discoveries can help to reach and support valid valuations, defend them against tax-agency and creditor challenges, and avoid the need for expensive appraisals and research to find historical precedents and “comparables.”

Second, cost basis for tax purposes: The original acquisition cost of assets, some very old, some even long-ago disposed of. They’re usually securities, equipment, business interests and real estate. It’s the original price paid, or the attributable value if acquired other than by purchase (such as inheritance), plus the cumulative costs of improvements in the case of tangibles. It’s often missing, elusive, never-before calculated or buried in old financial records, or archived in far-away companies and places, thus needing big-time detective work to ascertain.

Fiduciaries must calculate “gain” or “loss,” short-term or long-term, for income tax returns for the deceased person and for the estate or trusts. It’s also key in weighing the income tax implications in deciding whether an asset should be distributed to legatees “in-kind,” passing the gains or losses on to the estate beneficiaries. Or, alternatively, should assets be liquidated and distributed in cash, the estate taking the gain or loss?

Where to look and to listen? Beyond the Doomsday File, it’s meticulous searching, we know, but often rewarded by the discovery of a “nugget.” Look and inquire everywhere that Loved One could have placed — or misplaced — things or done business. Ask the family, friends, advisers and associates about locations that they might think of.

But also inquire among relationships, as far back in life as you can, as though you’re tracing a virus. Smitty successfully concealed several bank accounts intended for his children from his estate planning team and from second wife Thelma, stashing them confidentially in sworn-to-secrecy friend Rob’s safe. When the children asked Rob where he thought they might look for things — surprise!

My “where to look and listen” checklist also is too long to insert here, so it’s yours also upon request.

Hopefully, the detective work will be an interesting learning experience. Surely it will be nostalgic, as in “Gee, this photo reminds me of … ”

Next time: More estate-processing adventures. Meanwhile, I hope to hear from you. Also meanwhile, plenty of information is available from your professional team, knowledgeable and experienced acquaintances, and from the Internet if you google “estate administration,” keying in your state.

This story was originally published February 21, 2015 at 12:00 AM with the headline "Real Life | Managing the estate includes discovery and assembly of items."