Probate accounting is the process of placing financial value on the assets of a deceased person. This is part of the wider probate process, which covers the distribution of the assets. This can happen in line with a will, in line with a court's ruling on a disputed will, or through legal procedures for when somebody dies without leaving a valid will.
The phrase probate accounting can cause confusion, as in this context, accounting can be both a verb and a noun. As a verb, it simply refers to the process of preparing, checking and compiling the relevant figures. As a noun, it refers to the finished document, which is a formal declaration of the estate's finances and the proposed distribution to heirs. The estate is all the money, assets and financial liabilities left by the deceased person. The probate accounting treats the estate in a similar way to a business and contains a summary of assets and liabilities that is similar to that found on a company's balance sheet.
One major purpose of a probate accounting is to give the net amount of money in the estate. This is the amount that serves as the basis for executing the deceased person's wishes. For example, if a will refers to two children each getting 50% of the person's estate, it is the final figure from the accounting that is divided by two. The accounting's final figure is also used in situations where a deceased person leaves a fixed amount to one heir and says the rest shall go to another heir.
The precise contents of a probate accounting will usually be governed by state law. Generally, it includes details of all the assets and liabilities that existed in the estate at the start of the probate process, such as bank savings or investments. It also includes the details of any money raised by the executor of the will selling off assets. The accounting will also include proposed details for how the assets should be distributed. For example, the proposal may be that one heir shall receive ownership of the deceased person's property, with the property being independently valued and this amount being deducted from the heir's share of the overall estate value.
The legal requirements of a probate accounting mean it must usually be prepared by a specialist accountant. This is because a legal, financial or other procedural error in the accounting may be challenged. When an accounting is published, interested parties are usually given a period in which to object before the distribution of assets takes legal effect.