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Friday, December 30, 2016

I undervalued an asset on the estate inventory. Now what?

One of the tasks of an executor or estate administrator is to prepare an inventory of the estate. This is not always cut and dried, especially for an administrator who cannot always get access to records before the administration grant is issued. As a result, the inventory that is prepared shortly after the deceased passed away sometimes ends up with an error in it.

This is a situation that passed through my office a few weeks ago. A client of mine applied for probate of a parent's will and on the inventory listed an expected policy pay-out of about $65,000. From the paperwork, this was her best estimate as to what would be paid and I agreed with her. As it turns out, the actual pay-out was more than $275,000.

When there is a discrepancy this large, the correct thing to do is to file a supplementary affidavit at the probate court. You would re-work the inventory to include the new numbers and give a brief explanation of what happened. You wouldn't be the first person to do this, and you won't be the last, so the Clerks of the Court won't find it odd when you walk in to file this document.

Why is it important to file a new affidavit with the new values? When you file the inventory of the estate, it is part of an affidavit. You will have sworn under oath that the inventory is accurate and complete to the best of your knowledge. If you gain new knowledge but fail to update the value of the estate, you may be committing perjury. Just because you're not standing in a courtroom in front of a judge, don't think you're not giving evidence when you swear the affidavit.

The second reason is that the inventory serves many purposes, one of which is to inform the beneficiaries of what they will inherit. An executor who doesn't update a major change in the estate is not doing his or her job. And don't forget that the inventory is also used by the estate accountant to do the tax returns, and by potential creditors, and if the estate ever winds up in litigation, by the judge and the litigants. It's a mistake to assume that nothing will go wrong on an estate, believe me.

As an executor or administrator, you'll find that accurate records are your best friend.

If the discrepancy in the numbers was very small, I doubt the court would find the change in numbers to be material and would not find fault with an executor who did not update the inventory. It's a judgment call as to what is material and what's not.

When a supplemental affidavit is filed to show that the value of the estate has increased, the probate fee will also increase in most provinces, since it is based on the value of the estate.




3 comments:

  1. Excellent post. I have a situation where a residuary is withholding estate funds plus interest over many years and also a so called money gift from a parent without documentation. Total to date approx 100K. Lawyers are ignoring this. TBC

    ReplyDelete
  2. What happens if the reverse happens ? My parents' house was valued at a number but sold for over $20,000 less. We used the assessment which was off and not a fair market value.

    ReplyDelete
    Replies
    1. You can do the same thing. A supplementary affidavit can be either and increase, decrease or a discovery of a new asset.

      Delete

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