Listing the Inventory for the Inheritance Tax
The first step in calculating the inheritance tax is to list and value everything that the decedent owned. In general, this is the selling value that the property had on the date of death, or an alternate valuation date. Various methods might be used; the preferred method is to get an appraisal of the property by an expert such as a real estate appraiser, a stockbroker, a thrift store owner or auctioneer, an art dealer, or a car dealer.
For state inheritance tax purposes, it is important to designate whether the property was located inside or outside of the decedent's resident state. In Indiana, for example, real property located outside of Indiana is not subject to Indiana inheritance taxes.
Even jointly owned property, like bank accounts, houses, and cars, are inventoried for the inheritance tax return. State law will determine the taxable amount of these items.
Life insurance, pensions, IRA accounts, retirement accounts, funeral policies, refunds, and all investments are listed for the inheritance tax inventory. If an heir has been left a life estate (they do not get ownership, but they get the right to use a property until they die), a formula will be applied to value it for inheritance tax purposes. Each state differs in whether these items are subject to inheritance tax, but nonetheless they are included on the inventory.