When giving value to items and preparing the inventory, keep two things in mind. One is that it's part of a document that you will swear under oath to be true. So if it is found not to be true, you might be getting yourself into trouble. Second is the fact that an inventory of an estate is potentially seen and used not just by the executor but also by the judge, the lawyer, the accountant, the clerks at the Land Titles Office, the beneficiaries (and possibly their lawyers) and the creditors.
So, having been given the above warnings, how do you give value to assets? Some ideas for different types of assets are given here. You'll notice that having written back-up that proves you didn't just pull a number out of a hat is a good idea.
House, cottage - the best source of value is a property appraiser. If that is just not in the budget, also acceptable are estimates by realtors (get a few) and the appraised value given on the annual tax assessment notice.
Farmland - I recommend that you hire a property appraiser for valuation of farmland. Farm equipment should be valued by a farm equipment dealer.
Investments and accounts - for any accounts, investment portfolios, DRIPs, mutual funds, RRSPs, RRIFs, etc. you should rely on the statements provided by the financial institution. Remember that you always have to assign the value as of the date of death, so if possible get a statement dated that day. If not, get one as close to the date of death as possible and choose the balance that applied before the date of death.
Pension - for private pensions, contact the pension administrator (who should be identifiable by looking at stubs or letterhead in the deceased's records, or by calling the employer) and ask. In come circumstances, you may be given a "lump sum" value that would apply if an amount that would otherwise be paid monthly were to be taken all at once.
Life insurance - request a letter from the insurance company by quoting the policy number. Some policies pay only the face value, while others may have a calculation of face value + savings - loans.
Shares of publicly traded companies - you don't have to look up shares that are held in a portfolio as the financial institution or advisor will value the whole portfolio. But if there are shares held outside of a portfolio, you need to put date of death values on them. You can find these values online on sites for transfer agents or financial newspapers (e.g. Wall Street Journal, Globe & Mail). Make sure you get a historical balance that applied on the date of death.
Shares of private companies - depending on the size and complexity of the company, you may wish to bring in a professional business valuator to determine the value. Another good approach is to have the company's accountant value the shares based on the assets and liabilities of the company. If the business is going to be sold, you could contact a business broker.
Vehicles - your provincial motor association will let you know the book value of pretty much any vehicle. If this isn't available, ask for quotes from dealers and look in publications such as the Auto Trader to see what prices are being realized on similar vehicles.
Household goods - this can be the trickiest of all. If there is a collection of artwork, stamps, coins, hockey memorabilia, rare books, etc, have that appraised by someone in that field. If there is jewelry, have it appraised by a jeweler. If there are antiques, have them appraised by an antiques dealer or estate auctioneer. In most homes, however, the majority of household and personal goods are not commercially valuable. For those items, you can assign a more or less arbitrary number such as $1,000, as you are unlikely to obtain more than that for them if they were sold at an estate or garage sale.
Hi Lynne,
ReplyDeleteI recently bought your Alberta Probate kit and read your blogs. Despite the good information my family and I are still at a loss as how to document the “household and personal goods”. Even if we group the lower value items under this heading it seems that we are expected to have counted and place a value on every item (every chair, sock, fork …) in the house. What is reasonable? I find dire warnings that if this is not done properly the administrator may be subject to penalty and or suit. In PEI (ref:www.gov.pe.ca/courts/supreme/PracticeNote25.pdf ) lawyers are being warned of using what appears to be low “household and personal goods” value relative to other items in the estate.
Thanks for your assistance
I read the Practice Note you mentioned, and I don't read that as meaning you must account for every fork and sock. My interpretation is that the court does not want a nominal value of a couple of hundred dollars put on personal and household goods in cases where that is clearly too low, such as the farm situation they mentioned. There has to be some consideration given to the value of art, antiques, expensive furniture, china, silver, equipment, etc. Also that Practice Note warned against assuming that the personal goods of a spouse are jointly held with the surviving spouse.
DeleteTo translate these edicts into actual practice, take a look around the deceased's home. Do not include in the inventory items that have no value, such as used towels and sheets. Consider any collections (comic books, Royal Doulton figurines) and place realistic values on them by contacting shops or appraisers. Get appraisals of antiques, art and the like. Look up the value of vehicles, snowmobiles, dirt bikes, etc. In other words, spend a bit of time researching the value of as many of the larger items as you realistically can.
Most estates consist of furniture, dishes, small appliances, books, home computer, and other things that are neither toss-away junk like used socks, nor high-end valuables such as artwork. There is not a lot of monetary value to that kind of item, and I honestly don't think those are the things that the court is concerned with. You don't have to list every fork. You can place an estimate on the items - as a group - that you think you'd get if you held a garage sale or sold them on eBay.
Lynne
What should I do if 6 months after my parent's death, I see the executor's daughter driving around in my parent's car with my parent's license plate still on it? This isn't a one time deal....the car is being driven by the daughter on a regular basis. I live in a small town and see her driving to work daily in the vehicle...again with my parent's license plates still on it.
ReplyDeleteJust as an FYI, the daughter of the executor is not in the will. I am a residual beneficiary and the vehicle does form part of the estate as it was not jointly held. Thank you
When estate advances are issued by the pricipal before death, are those advances considered part of the value of the Estate in terms of a "5% of Estate Value" fee by an Executor? Or has the Estate Value been reduced by the advances, thus a lower fee.
ReplyDeleteHi Wilfred,
DeleteI believe you're talking about, for example, a parent giving money to the kids while he's alive, then creating a will that gives the estate to the children. In a case like that, those advances are generally not included in the estate inventory. This is because the purpose of the inventory is to give a snapshot of the assets of the deceased on the day he or she passed away. Since he no longer owns those assets on the date of his death, they are not included.
Since the executor never handled those assets, there is no reason at all the executor should be paid a fee for them.
Now, of course, there is an exception to the general rule. If assets were put into joint names with a child of the deceased but are still meant to be distributed on the deceased's death, they are still in the estate.
There are lots of factors to take into consideration, but there is only so much a person can fit into a blog post!
Lynne
I have a question about fmv. when my mom died in 2016, she had two homes, we used the value at that time as per the assessment to submit probate.
ReplyDeleteWe got an accountant to do final taxes. They messed the whole thing up so bad and charged us a ridiculous price. When they finally submitted taxes after a year and a half they used fmv for a year after her death. The prices of the homes had obviously gone up.
on the CRA's website it clearly says the fmv is the value of the real estate at the time of death so why would an accountant use fmv of the homes 1.5 years later. that sounds wrong to me.
Because the taxes were done wrong, we owe money. We agree with that, but we do not agree with the fmv the accountant used because neither home was worth that amount of money when she died. it seems unfair.
does anyone have an answer for this. Is this something we could dispute with the CRA.
thanks for any help. this whole thing is a total mess right now.
Diane
Hi Diane,
DeleteThere are two sets of taxes. One is the final tax return for your Mom and the other is the final return for the estate. You have to realize that your Mom and her estate are two separate taxpayers.
I'm not an accountant, but it appears to me that this is where your issue lies. The value was one amount when your Mom died and the property left her, and a higher value when the property left the estate. This means that the estate earned value or income for the year and a half that it owned the property.
I don't see anything wrong with using the second FMV. It makes sense to me, but if there are any accountants reading this, they should feel free to add their opinions.
Lynne
thank you for you reply lynne. its confusing. We have decided to appeal because we feel its wrong.
ReplyDeleteHi there,
ReplyDeleteHow do you determine FMV on a property you are to inherit? And at what point is that made? (Upon completion of probate, or at unfortunate time of passing?)
When an executor takes on the administration of the estate, all assets are valued as of the date the testator passed away.
DeleteI can't speak for all executors but my advice to the executors I work with is NEVER just pull a random number from a hat to value an asset. Depending on the type of property (residential, commercial, undeveloped land, etc) the value might be set by a professional, licensed valuator. To me, that's the gold standard, but it's not usually done because the valuation costs money.
Another option for valuing a property is to have realtors give estimates of what they would list the property for on the market. When this method is used, I always suggest that clients get at least two realtors to provide the estimates and if the two are very far apart, to get a third.
Another popular option for setting the value of a property is to look at the municipal tax assessment for the current year and use the valuation given on that statement.
The value of the property can change between the date of death and the date of transfer to the beneficiary. Markets change and in some cases, they change rapidly. When the property is transferred to you, the transfer paperwork will ask for the value as of the date of transfer. If very little time has passed, there will probably be no change from the date of death value.
So, as you can see, the initial value is set at the date of death, but a different value may be appropriate on the land registry documents on the date of transfer.
Lynne
Lynne,yes getting a professional valuation right after death is the best advice it is well worth the cost. wish we had done that, but we were not aware you should.
DeleteWe did manage to get the fmv lowered to the correct fmv at death but it was certainly not easy because all we had was a realtors email, if you get a realtors valuation make sure its on their letterhead and not in an email. just things we have learned and can perhaps pass on to others.
This site is wonderful, it has such good advice.
Diane
Diane, it's hard to get everything right when you're an executor, as you're finding out. Unfortunately, some executors, even when they're told the importance of something like a valuation, are still reluctant to spend the money. It's only after you learn things the hard way that the real value of things seems important. Anyway, it sounds as though you've made it through.
DeleteLynne
Thank you Lynne, and yes it is hard getting everything right. I have learned so much through this experience. it has been a long process, thank you for answering my questions and for the great advice. Wish I had discovered your site when I first started the process, I might have had less headaches. I hope others benefit from your great advice. And yes we finally made it through.
DeleteDiane
Forgot to add to previous comment, who’s responsible for checking or determine FMV? (Executor? Lawyer? ...?) Ty :)
ReplyDeleteThe executor.
DeleteLynne
For probate purposes, can the value of stocks be reported net of embedded capital gains tax?
ReplyDeletei.e. reduce market value on date of death by amount equal to market value on date of death, less cost base, multiplied by mom's effective tax rate on capital gains
I'm her executor and face this right now!
You should be reporting market value at date of death. Use tax returns to sort out the rest.
DeleteLynne
Hi Lynne,
ReplyDeleteGreat article on assigning values to estate assets.
What is the fiduciary obligation of a sibling who is the executor of the estate and is negotiating with a co-beneficiary sibling in the case of a parent’s home? I am interested in purchasing my sibling’s ½ share of my dad’s home.
My sibling is looking for 10% more than what the real estate agent said the house could sell for if it was listed on the mls - which is 20% more than the agent’s take on fmv. Basically, more than what the estate would receive from a third-party buyer if the house was sold on the mls for their ½ share.
What recourse does a beneficiary have if they are willing to match but not exceed what the estate would receive from a third party buyer if it was listed on the mls on a net basis. (i.e. net of real estate commissions & comparable selling costs) Contest the will if there is a stalemate or just walk away and wait for their share of the final distribution of the estate. Also, are the tax implications to the estate if the house is sold above the fmv reported on the final cra return? I read this in an earlier comment.
Thanks for your assistance!
Are leased cars or financed cars included in estate tax probate calculator
ReplyDeleteWhat if cars financed / or leased in corp name.
The probate covers everything that the deceased owned. Generally when there is a lease, the deceased doesn't own anything. Therefore you would not include a leased vehicle.
DeleteA financed vehicle, on the other hand, would be included. The deceased would own the vehicle, but would also own a debt. Both the asset (the vehicle) and the debt would be part of the estate.
Lynne
Hi Lynne, I love reading your blog. However, with regards for appraisals you mention using the property tax assessment, which is phased in over 4 yrs. what happens if the house wasn't finished at that time of assessment,then finished but never reassessed? Would it then be the Executors judicial duty/due diligence to have an appraiser come in and not place reliance on a property tax assessment that has below actual sq footage living space? In this case the valuation would be much less than fmv, correct?
ReplyDeleteThank you.
From Ontario
Hi, I'm glad you like the blog.
DeleteYou are correct about the valuation. The value you put in your inventory is sworn to be the true value, so there's that issue.
Think of it this way: Imagine that there is someone out there who is DETERMINED to get you in trouble for the values you have given the assets. Then protect yourself. Make the inventory as airtight as you can.
Lynne
Hello Lynne
ReplyDeleteI am also in Ontario. What happens if the Executor (appointed in will) sells the Estate home, just relying on the property assessment, same situation where the basement was finished but not reassessed, selling it below fmv? The Executor was allowed to distribute assets from the estate, but the estate was in jeopardy of not being able to pay mortgage, house insurance etc. Even though the executor was allowed through the will to distribute items, should he/she sell items so the estate could have paid these,instead of going in arrears? The Executor gave away everything (including themselves, plus a car) sold the house all within a month, then after everything was done, applied for the certificate of estate trustee.
Thank you
The executor is playing a dangerous game, financially. Of course he is allowed to distribute things under the will, but always within the law that says that debts and expenses are paid before beneficiaries get anything.
DeleteIf the mortgage or insurance are unpaid or in arrears and the executor has given away items per the will, he is personally liable for those shortages or arrears. I hope he feels like paying for all that himself because it sounds like he just might be doing that.
Lynne
Thank you for your reply! I'm the common law spouse,but wasn't on the house. I've been in a legal dependency claim for 2 yrs and the executor didn't have the decency to ask me if I wanted anything,so I have nothing to remember my late spouse by. He also refuses to provide me with documentation to show what he spent money on to administer the estate.
DeleteThank you
Hi Lynne
ReplyDeleteWhat happens if an executor doesn't have any receipts, documentation or notes on how he administered the estate or how he distributed assets in Ontario?
I have no context at all for this question. The answer is going to depend completely on the situation.
DeleteIs anyone objecting to his distribution or asking for documentation? If nobody cares and nobody asks him for anything, then nothing is going to happen.
If he is being asked to prove what he did and has no paperwork then obviously he's going to have some trouble doing that. He will be able to reconstruct some things by third-party records such as cancelled cheques, e-transfer records, bank statements, etc).
If there is no money missing, then with or without records, he is probably going to be alright. If nothing has gone wrong then any objections by beneficiaries aren't going to seem reasonable. I mean, sure you have the right to see receipts but if the transaction is backed up some other way and is not suspicious then why make it a problem?
Now, if this executor has done a sloppy job and the beneficiaries simply do not trust what he has done and are demanding that he demonstrate his accounts, he could be in trouble. If there are losses or transactions that can't be explained, the executor may well be on the hook personally.
Lynne
Hey there Lynne
ReplyDeleteI was wondering if it is common practice for a named Executor (Ontario)
to stay at the estate home and not pay rent or any bills,distribute all assets (and not sell anything)he was allowed to gift a few items to immediate family, kick the common law wife out of the home, put the house up for sale and sell it, all before applying for the Certificate of Estate Trustee?
Thank you
The Common law Wife
Is it common practice? Well, let's break this down. It's not common practice for an executor to live in the deceased's home rent-free. Sometimes it may be necessary or advisable for a short term, if there is a problem tenant or some other issue. But not for months on end. Payment of the bills is a bit trickier, since heat, insurance etc would have to be paid anyway until the house is sold. Putting the house up for sale is common practice, since it is usually advisable not to delay matters. As for kicking out anyone in the house who doesn't own it, yes that would be usual. Otherwise the house cannot be sold. I'm not sure whether your question is if he can do these things, or whether it's the fact that he's doing them without having the Certificate in hand. He won't be able to complete a real estate sale without the certificate. Other assets may be problematic too, without the certificate.
DeleteLynne