Which debts should be listed on the estate inventory?

Executors and estate administrators are required to complete an inventory of the estate which includes a detailed listing of assets and debts. I'm frequently asked by executors for help or information about which debts should be included. In this post I'm going to provide some general rules about what should be included and what should not. While forms and details will vary from province to province, the information given here is general.

The first rule of including debts is to include all debts that existed at the date the person died. All assets and debts must reflect the date of death value. A mistake that many executors make is to leave out debts that were paid shortly after death. For example, when the deceased died, he may have owed $300 on his Visa credit card. If his executor paid the bill a month later, the Visa bill still needs to be included in the inventory. Yes it was paid later, but that is irrelevant to the inventory, which is a snapshot of the financial picture on the date of death.

Funeral expenses are always included. If they total more than a few thousand dollars, it would be a good idea to list the components of the funeral bill (services, casket, plot, flowers etc) separately. In some jurisdictions, there is a dollar limit over which you must break down the components individually.

You must include any outstanding tax liability, including income tax and capital gains tax. This might apply to the last year of the deceased's life, or previous years in which a return wasn't filed, or to the estate itself. Tax debts should be identified by the calendar year to which they apply. If you don't know exactly how much tax is owing, you should include an estimate, preferably an estimate supplied by an accountant.

When it comes to general debts, you are required to include all legally enforceable debts. These frequently include (this isn't an exhaustive list - there are many more possible debts):
- mortgage (when it's not life insured)
- condo fees that were payable but unpaid at the time of death
- rent that was payable but unpaid at the time of death
- unpaid property tax on real estate owned by the deceased
- credit card balances
- the last phone, utilities and other bills for the deceased
- loans and lines of credit, both secured and unsecured
- amounts owing under personal contracts (such as caregivers or those providing household or garden help)
- child support payable under court order, and usually payable under separation agreement though this can be altered by the wording of the agreement

Don't forget to include accrued interest, if applicable.

Generally you would not include debts that were owed by the deceased jointly with another person, when that other person survives. Having said that, make sure you check the contract or other document that created the debt.

Don't include debts that are life insured, as the life insurance cancels the debt at the moment of death.

Remember that any debts having to do with real estate (land or mineral titles) must be documented in writing to be valid.

Depending on the situation, an executor might not be sure that he has accounted for all of the debts. One way of protecting himself from legal liability in this situation is to publish a notice in the newspaper advertising for creditors of the deceased. There are detailed rules about how and where to publish these notices if the executor chooses to go this route.

One final general rule - document everything you can. Don't guess or estimate if there is any way to establish the exact value of a debt. Executors are often called upon to show where they got certain numbers, so keep all items pertaining to debts.