When you define an asset, you are asked to specify its type (e.g., Stock, Vehicle, Jewelry, etc.). This is helpful so you (and anyone else, such as the Court), can understand what the asset is. EstateExec also uses asset type when calculating cost basis, so it's important to select the appropriate type (see Manage Asset Cost Basis).
Asset types are generally self-explanatory, but here are some helpful tips:
Annuity: An annuity is an investment that pays a fixed amount every year.
- Qualified — Funded with pre-tax dollars, so everything it pays is generally considered income: its cost basis is treated as $0.
- Non-Qualified — Funded with post-tax dollars, so only the earnings are considered income: its cost basis is generally the amount of post-tax dollars originally used to fund the annuity.
- Bonds: Also includes bond funds. Note that government-issued savings bonds have potentially complex tax treatments (examples); it's probably best to research your particular case and manually override the cost basis as described above).
- Brokerage Account: There's no need to list every single stock individually for the purposes of estate settlement, so it's fine to just list the combined value and the combined cost basis for a brokerage account as single asset. However, if the account contains any retirement funds, it's best to list those as a separate asset, due to tax treatment differences.
- Cash: Does not include foreign currency, which should normally be listed as the "Other" type (due to the special tax treatment of foreign currency gains and losses. Note that the cost basis of cash is the cash itself, so EstateExec automatically updates the cost basis of any distributed cash to be the amount distributed.
- Deposit Account: Includes things such as certificates of deposit (CDs), savings accounts, checking accounts, money market funds, and the like.
- Estate Account: Usually corresponds to a bank account the executor establishes to manage the administration of the estate.
- Loan: A loan that the decedent or the estate itself made to someone else (the "lendee"). When the lendee repays some or all of the loan, you should record this payment in a loan repayment cashflow transaction, which will automatically reduce the remaining value of the loan asset.
- Retirement: This category includes accounts which were funded with pre-tax money, such as a standard IRA or 401K. If the IRA was partially funded with post-tax money, you will want to manually override the cost basis, as described above. Roth IRAs can be a little tricky, so it's probably best to list them as Other, and enter the cost basis you feel is appropriate (the distributed value in most cases, but you may want to enter the actual amount used to fund the account if that will be more useful to the heir). See Cost Basis for background information on retirement funds.
- Stocks: Also includes things such as mutual funds and ETFs.
- Trust: This asset type is only for trusts that existed prior to death (trusts that receive assets from the estate should be listed as Heirs, not Assets). Moreover, you may not want to include irrevocable trusts in an estate, since they are not subject to probate or estate taxes, and the executor (in that role) has no control over them. Be aware that if you list an irrevocable trust as an estate asset, its value will be included in the overall estate value, even though such assets are normally excluded from estate tax regulations, and its cost base will be automatically stepped up (which would be incorrect for irrevocable trusts with their own tax ID: you should manually override the default cost basis at death to be the actual cost basis prior to death). In addition to whatever makes sense for the estate, you may also want to set up a separate EstateExec "estate" for a trust if you are managing it, so you can generate accounting reports specifically for the trust, deal with the trust beneficiaries exclusively, and so forth.
See Manage Asset Cost Basis for information about tracking cost basis with EstateExec.