An estate final accounting is the last step in the process of closing an estate and distributing the assets. The process and forms required differ from state to state so it is important to check on the particulars required for your state. The estate’s final accounting is basically a financial statement itemizing the finances of the estate. Every asset, down to the penny, must be properly documented and allocated. Any errors in the paperwork may result in the probate court rejecting the document.
Some key elements of an estate’s final accounting include:
The executor must take inventory of all assets and establish the fair market value of those assets at the point in time the deceased passed away. Over time, that fair market value may fluctuate, and this must be accounted for in the financial statements. A fair market value for any fixed assets such as real estate, cars, antiques, or jewelry must be determined at the beginning of the probate process and again at the end of the process. If any assets are sold, the accounting must indicate the sale price of the asset as well as any differences between the appraised value and selling price.
The executor must collect any income that was due to the deceased when they passed away as well as any income gained by the estate during the probate process. If the estate includes rental properties, then the executor needs to ensure that all monies owed are collected and accounted for in the final accounting. The executor continues to hold this responsibility until the asset is sold or probate is closed. The final accounting must include all income received by the estate after the deceased’s passing listed separately and indicating the source of said income.
All money paid out by the estate during the probate process must be accounted for. Information needed includes:
- Date of disbursement,
- Name of individual/business that received the disbursement,
- Reason for the disbursement (paying outstanding debt such as credit card bill, paying for court fees, etc.), and
- Amount of the disbursement.
The executor can pay out smaller disbursements at his or her own discretion but needs to carefully ensure that all claims for disbursements are legitimate.
This is the final step in the process. Once the valuation of the assets is completed, the bills are paid, and specific inheritances given out, the remaining estate is distributed between the beneficiaries according to the percentage allotted to each individual by the will. This is very easy if the estate has been liquidated and all that is required is writing out the checks.
It is more complicated if the estate includes assets other than cash. In this case, the final accounting must demonstrate how the assets were distributed and how the executor determined what an equitable distribution of said assets was.
The executor may be entitled to receive payment for his or her services. If so, it is typically calculated as a percentage of the estate. This must be included in the final accounting as well.
Assets Not Included in Probate
Some assets are not included in the probate process, such as:
- Retirement accounts which name a beneficiary,
- Life insurance pay outs,
- Property that is held in a living trust, and
- Assets that are jointly owned and have a right of survivorship.
These assets are not included in the estate’s final accounting.
If the probate court or one or more beneficiaries are unhappy with the final accounting, the process may have to be gone through again.
You do not have to be an accountant to be an executor or to complete the estate’s final accounting. The key to making the process as easy and straightforward as possible is keeping good records of all transactions, no matter how big or small each transaction might be.