0:00 weekly I'm your host Kevin bemel and we're here every Monday at 10:00 a.m. Pacific time to talk about both the estate planning side of trusts and Estates as well as the administration and settlement side uh and uh you know also both from the perspective of doing our own Estate Planning and also as um you know from being professionals who are helping people doing this work so uh whether you're interested in making sure your own estate is in order or
0:36 whether you want to help people get their estate in order or settle them for them um this is the show for you every Monday at 10: a.m. so today I'm going to talk about um part of the probate process and indeed it's really part of of the um Trust settlement process as well it's just not done the same way and that is doing an inventory and Appraisal of assets so when uh an estate is going through probate that will be part of the
1:12 formal probate process now when property is being transferred through a trust so it's not going through probate nonetheless there needs to be at least an informal um inventory and Appraisal to determine whether the estate um is subject to estate taxation so the fact that an estate is passing through a trust does not at all mean that it doesn't have to pay estate taxes those
1:47 are two very different issues and although right now the the estate tax exemption is is quite high around $13 million uh per person and so for married couple in essence they're going to get double that um the uh in that that high limit is is slated to end in 2025 and so it will uh drop back down to I believe it's around $4 million in January 1st of 2026 unless the um the uh
2:22 tax legislation of 2017 um is extended somehow um and as well there are States that Levy an estate tax and for those States the limit at which the estate tax uh starts is in in in some cases significantly lower than the federal limit so um again you know even if you're settling a trust um there still needs to be an inventory and Appraisal um in order to determine the overall value of the estate to see
2:59 if it is in fact subject to estate taxes so well this is weird I had a whole bunch of documents ready to show you um and they all disappeared so let me let me bring those up again um so I can show you how this works and here we go and the last one there's there's a total of four of them okay so um I'm going to show you first the California forms and
3:35 process so you can get an idea of how it works um each state will will have its own uh forms um and and and process although in general you can see I'm also going to show you the forms for Alabama where I've also um settled in a state and you'll see while there the forms look different the processes is pretty much the same okay so let's start out by looking at What's called the de60 so this is the form that that needs
4:13 to be filed in California when the inventory and Appraisal is filed okay and you and if for those of you who are um at all familiar with legal forms you you can see this it it it you know looks just like the standard legal form okay and it's it's a two-page form so that that was first page here's the second page here you can see the instructions um by the way you can download this form as a fillable PDF so it's really easy um um to fill out and although you know you
4:49 may have a lawyer who's helping you with the estate who will fill it out for you uh it it's it's really it's really not that difficult I'm gonna I'm going to show you a filled out example so you can see what goes in each of them but I just want to show you the blank form for a minute you can see it's it's not very long here it is you know inventory and Appraisal estate of decedent conservator minor right these kind of things the the the the court in which the case is being heard this is the attorney or or the party um you know the party who's in proper meaning without an attorney who's
5:24 filing it okay and you see here appraisals you know the total appraisal by repres presentive Guardian conservator is X and the total appraisal by referee is is y and so the total amount is whatever that amount is okay and then you see there's a declaration and um you know depending on who it was who's filing it um and here's the Declaration the probate referee if one of them is involved okay so that form is is sort of the summary if you will of
5:59 the inventory and Appraisal okay and you'll have as an attachment to it an actual inventory and Appraisal form and this is this is it this is the de 161 right so 160 161 okay and basically you see here um that you know you put in the name of the estate and the case number and then you have three um categories here you have item number uh description and then the appraised value okay item number one two 3 four five right uh
6:36 description could be anything from you know coin collection um and then the appraised value is is is just that it's how how much is this particular asset worth and again I'm going to show you an example of this actually in just a moment so you can get an idea of of how this is actually filled out but just like the de1 160 this is in a PDF fillable form okay and and you can see page blank of blank total pages right so you know it's anticipated that you'll you know you'll use as many uh Pages as are required and
7:14 also you'll see in the example which I think is really well done how they um you know they didn't like cram in you know tons of line items they left some white space so it's easy to read um which which is a good idea um but in any event this is a fillable form um and just like the other one and uh so um you would just attach as many of them as you need okay so now let's let's look at let's look at an actual example okay I'm gonna um go go these okay so here is the
7:50 form de60 filled in okay and you can see here at the top in this case there's an attorney who is handling the legal side of the probate and his doesn't matter what his name is but you have his name his State Bar number telephone number address okay and um and then um and then the well it's actually the law firm's name and then here's the uh here's the other person's name um David Lorry conservator okay so it's being filed um
8:26 evidently on by the attorney and the conservator okay the Superior Court of California County of where whever it is Los Angeles Monteray San Diego um you know whatever the county is and then you know the the address of the Court um and the uh you know Branch name of the Court okay and it's estate of and this would be the decedent's name okay and um in this case it's a conserva as opposed to a decedent um doesn't you know that just is
9:01 whatever you know whatever it is okay inventory and Appraisal now you can see there's several one is partial um so maybe it's it's a an initial uh inventory of an appraisal but you know there are other assets they just haven't been valued yet the next one is final meaning this is it we don't anticipate there being any additional assets identified that need to be included supplemental means we found some other assets right and and they weren't included before so now this is this is a supplemental okay and then here's here's
9:38 corrected okay so look sometimes mistakes get made um maybe there was some information missing about a property and so they had to do a corrected value okay reappraisal for sale so if a property is being sold and let's say that for whatever reason they you know after you know a thorough marketing of the property they weren't able to get the appra the original appraised value um so they would do a reappraisal for sale showing why the court should approve the sale at
10:13 the lower amount and then property tax certificate is is just what it sounds like okay so then um here's you know appraisals again this is a total appraised by the representative Guardian conservator it's an attachment one um and then the total appraised by a referee in this case um there is nothing appraised by the referee so the total would just be the total from um the representative's appraisal okay and then Declaration of Representative guardian conservator or small estate claimant um this is the person um in this case it's
10:49 the conservator and he's going to sign um and and and you know he's essentially declaring um under penalty of perjury had you know the the the following facts in this case um addend attachments one and two together with all prior um inventories filed is a true statement of all of the estate that that comes to my knowledge or possession including particularly all money and all just claims da D D D D D okay so that's what you're declaring okay statement of bond in this case um it doesn't appear that a
11:26 bond was necessary now if may be that a bond has already been filed and so in that case you'll just state that there's already been a bond filed um and it may be that no bond was required so that you know the bond may have been waved if this was being done under a will um where where the bond was waved okay and then Declaration of probate referee as I mentioned a minute ago there is no probate referee um valuation so this would just be left blank now let me just take a minute and talk about what a probate referee is so
12:02 it a probate referee may sound like someone's in the courtroom there to keep order right we think like a referee in a football game for example that's that's not what this referee does uh a probate referee is essentially a valuation professional who works for the court um they are typically assigned um when the um letters testamentary are issued by the court and the probate referee's job is to do evaluation of all the assets of
12:39 the estate okay now it's interesting because if you think about appraisers generally speaking they have certain Specialties so you may have a jewelry appraiser you may have someone who specializes in coins or coins and stamps you may have an appraiser who specializes in antiques or even in a subset of antiques for example um you know ancient uh Far East antiques or something like that and then you'll have an appraiser who specializes in real estate sometimes they'll specialize just
13:14 in re uh residential real estate and other appraisers will specialize in commercial or commercial industrial real estate right so and the reason that's the case is because it takes a different skill set and body of know college to be able to appraise these different kinds of assets by the way I left out appraising a business so business appraisers also uh have very specialized knowledge so in the case of a probate referee they are expected to know how to appraise every type of
13:49 property okay um and you know candidly I think it's a little bit strange um because um having been an appraiser in my career before so before I joined the Navy one of the um key professional activities I did was I was a real estate appraiser um now I appra I appraised a broad array of real estate um although I started out in residential and then moved from residential to Commercial and Industrial and then I had a client who who eventually I was the sort of go-to
14:25 guy whenever they had something that was so unusual they couldn't find anybody else to do it right so I did things I did I did Lumber Mills I did a um shipping refueling facility I did a mineral processing facility I did casinos right all these kind of weird things um and each time I had to you know I I oh I did golf courses so each time I I was asked to do uh you know another unusual type of of a praise and unusual type of property there was a certain amount of learning that I needed
15:01 to to go through so while the basic techniques were the same uh comparison approach income approach cost approach those are the only three ways to appraise um real estate how to apply those the metrics that are used um collecting the correct data all of that there are nuances in it depending on the property type and and while I spent roughly 20 years in the appraisal business um it it took me you know 10 to 15 of that yeah about 10 years before I
15:38 was able to get to the point where I could start doing some of these unusual appraisals with anything like what would be well with with competence forget anything like competence with competence um and and when I say with competence meaning that they could be reviewed and and and and pass a review um as as being um you know you know a legitimate valuation so you know the idea behind a probate referee um being able to Value any type of property um
16:13 it's it's it's a little bit strange um also what they get paid so here in California um probate referees their fees are on Tenth of 1% of the appraised value of of the Assets Now for anyone who's an appraiser or who's dealt with appraisers you you you probably know that um what's called the uniform standards of professional appraisal practice which is the ethics standards under which appraisals are done across
16:48 the board for all types of properties they prohibit a fee based on the value of the property and it's easy to see why because if my fee is based on my appraised value then there's an incentive to appraise the property as high as possible because that maximizes my fee so in fact in every appraisal done according to uspap uniform standards or professional appraisal practice there needs to be a statement affirming that indeed the fee is not based on the appraised value okay and
17:24 and um you know in the early days of professional appraising that that was somewhat controversial because you can see here in the case of the probate referee their fees are tied to uh a percentage of of the value of the property so again it's a it's a little bit weird it's not how appraisals are done um outside of the Probate Court World um and and that's not to say that therefore um Probate Court uh probate referees um are not
17:59 professional or that they skew values I'm I'm not implying that at all um I you know I take it on faith that probate referees are like every other profession there are there are good ones and there are ones that are not as good there are ethical ones and there are probably some you know that aren't ethical that's that's true of every profession um and and I'm I'm actually hoping to get a probate referee um come on to a a future show because I I I'd love for you to be able to actually hear directly from them hear about the kind of challenges that they're they're faced with okay um so
18:36 you know um in a case where you know an estate is is valued at you know a million dollars um and and the probate referee needs to Value all of the property that make up that million dollars so the probate referee is going to get a fee of one tenth of 1% which is ,000 now that's very low for most appraisals um you know well I mean it you know depending on the complexity but but that's probably a pretty low fee frankly right so um um you know their
19:15 work is generally done very efficiently um it's generally what would be called in the appraisal World a desktop valuation okay um rarely will they um go out and drive a property rarely will they walk through a property okay they just don't have the time to do that now these days with things like um uh you know Google where you can you know go on essentially a satellite and and look at a property um you know you can get a lot more information sitting at your desk than you could have uh you know prior to
19:52 Google like in the days when I was an appraiser you you just didn't have that kind of thing available at all right um and so um probate referees have more tools available today than they did in Past Times um but but nonetheless like I said the the the the valuation I I I frankly wouldn't really call it an appraisal but the valuation that they do uh is is really more of a um uh it's it's a desktop um valuation as opposed to a full-blown appraisal okay so let's
20:29 let's go now to the um the de1 161 so you can see here's a list now in this case um this uh let's see it starts out with okay so these are cash assets so um the way the person filing this grouped it you see this first uh attachment number one page one of one is uh cash assets so there was Cash found in the house lying around um there was a checking account there was a savings account there was a CD there was an uncashed check uh another uncashed check
21:06 and another uncashed check okay um I mean you know you wouldn't have a probate referee do evaluation of those because cash is worth what is worth right so you don't need that would be um that would be valued by um whoever is submitting the the uh inventory and Appraisal okay now let's go to the last page here this is going to be attachment number two and this is non-cash assets okay and in this case there here's a piece of real property here's another piece of real property furniture and
21:41 Furnishings um shares of a mutual fund uh a savings bond another savings bond a car and some jewelry all right and you see here um all you know they didn't fill in the appraised values but if if this um there's there's two ways these values would get filled in one is whoever is submitting this fills them in and that person may be qualified to do so and if so fine if they can petition the court and the court may agree to that otherwise a probate referee will
22:17 appraise all of this property so the two pieces of real estate the furniture and furnishings and you know the other Securities Okay so um now by the way they might not do the Securities because um it's it's easy for um let's say it's an Executor um who's filing this so the executive can just call up the brokerage holding the the Securities and say hey would you generate a list of the Securities valued as of the date of death Bang there it is and then they can just fill that in it is what it is um
22:52 and in terms of savings bonds depending on the date of the bond um you know if the bond has matured and it just wasn't cashed so we know what it's worth um and and there are actually sites that you can go on to on the internet where you can plug in the information about a bond and they will tell you what the Redemption value of that bond is now for a car uh you know you the the the probate referee May value that although there are there are you know again websites you can go to uh um what is it kellybluebook.com I believe it is and get a value for a car based on the
23:28 information the you know the the condition of the car the the age um the mileage etc etc and then jewelry you know again this would typically be something a probate referee would value um but you know if you could also um there may be a a prior appraisal of the jewelry maybe uh for insurance purposes um that that could be used um and the court might accept that or you you know you might have to take it to you know you might take it to a jeweler and have the Jeweler do the appraisal so
24:04 you know again um there's there's various ways the valuations can be determined but then um you know they'll all be listed here and then going back to the de60 okay so the total amount the total appraised by the representative guardian or consu will go there the total appraise by the referee will go in the next line and then those two those two values together will be the total appraised value okay so that's that's really you know what it's about here in California um pretty pretty
24:40 straightforward um not that it it can be done quickly not necessarily because data has to be compiled etc etc etc um but but you know filling out the forms is pretty straightforward it's really determining um how the property how the various assets will get valued that that that's um you know that adds some complexity and that may require um you know some kind of petition uh to to the court so um okay so now I'm gonna I'm gonna look at show you one from another state
25:16 just so you have something to compare so this is probate court of Mobile County Mobile County is in Alabama okay and you can see this is very very different looking form much simpler okay you have a state of the AC of the deceased case number okay and then um here it is you just have description or address and estimated value now this is the real property schedule okay so that's you put real property there okay personal property
25:51 right and and just real quickly reviewing the difference um real property is land buildings and or other things AFF fixed to the land and things that are called apperences apperences are things that must be sold with the land so for example water rights those kind of things that's real property anything that's not real property is personal property that is property that's generally movable Furniture cars jewelry um uh even Securities when I say Securities like stocks bonds that's all
26:27 personal property okay so page two you describe and estimate the value of personal property okay and then page three is bank account informations checking accounts savings accounts CDs all of those um and any other Investments all of those are listed here with the account number and then the balance uh in the account um most likely it's going to be as of the date of death and then in this case you see it's filed by the personal representative okay who signs a certification and then and then it must be notorized
27:03 okay so the this form is much simpler um than than the California form um but you can see it's really um in in some ways it's it's it's more cogently organized because it's showing you um unlike the California form where you would have to do this organization yourself using three different de1 161s here they're there're it's already mapped out for you um real property personal property and bank accounts okay and then here on page four you'll just see you know here's you
27:38 know assets to look for in preparing inventory cash on hand all that kind of stuff um stocks bonds jewelry antiques Furniture life insurance okay all of those etc etc and then liabilities to look for so if there are liabilities those are going to those are going to uh potentially reduce the value of the estate okay and depending on what the regulations are regarding estate taxes um that may help uh reduce if not eliminate estate taxes now to the best of my knowledge Alabama does not have an
28:13 estate tax um but but uh you know things change all the time um I haven't done a a probate there um in in a couple of years and so uh you know always good to to check these things to make sure um but this is a really nice nice nicely organized form and like I said I think it's in some ways better than the California form uh because it's it's more uh you know straightforward and and and how it's organized um and and and and very well done okay so um in any event no matter which state you're in
28:48 okay there is going to be some kind of form that the Probate Court there requires to be filed for an inventory and Appraisal now by the way just just going back to the the Alabama form for a minute um this is such a nice form um if you are administrating an a trust where again you're not going through probate nonetheless this is a nice way of organizing the assets of the trust um to determine whether the the estate being
29:24 transferred by the trust is subject to estate tax um and particularly useful is this list of assets notice for example life insurance policies right the proceeds from a life insurance policy owned by the deant is included in the calculation of the value of the estate for estate tax purposes on the federal level probably is on the state level that again those laws vary from state to state but but it you know you notice
29:59 they put that in here okay and and that's a that's a good thing to remind people that um you know of the list of assets that are included notice they also mentioned a safe deposit box there could be assets um having special value in a safe deposit box Beyond just you know valuable documents and if so again those need to be checked and included in there so so again this is a really nice uh form that you can use now you know if you're going to do it all the time um
30:35 you know I use I I you know use uh Excel spreadsheets um to do my um my inventories and appraisals um and but I still break them out in in those categories um because it makes sense to do that and um and and you know that that list like I said especially if you're inexperience um is is a great list to help you not miss some kind of assets all right so that is the inventory and appraisal and uh it it is a crucial part
31:14 of any probate as well as something you need to do when you're administrating a trust um although it won't be filed with the court in that case so if you have any questions or comments please feel free to post them in the uh our social media or you can send me an email my email address will be in the show notes after the show posts on YouTube uh so feel free to reach out happy to answer your questions uh and um if you have any comments thoughts always love to hear
31:50 them and by the way while I'm mentioning YouTube uh if you're not a subscriber to the show um please consider clicking the Subscribe button and that way you'll know every time a new show is is is going live you can join us and or you can watch it later um on on a replay so that's our show for today tomorrow at 10: am is business lessons from the military and the show is about solving problems that meet the mission uh and you would say well why would you ever solve a problem that doesn't meet the
32:26 mission okay I'm going to let you you know Ponder on how often that happens so we're going to talk about how the military deals with that and and keeps that focus and then on Wednesday at 10: am all of these times are Pacific time uh we'll be doing um the monthly state of the economy cutting through all the nonsense of all the figures and really getting down to what is it we need to know what is it we need to focus on so we can make good business decisions good investment decisions so I invite invite you to join me Wednesday at 10: a.m. as well thanks again for joining me really
33:03 appreciate it always and uh signing off as I always do Marie darling you're my bell all the best