National City Bank used to rely on old newspapers to place values on estates in the probate process, but for the last three years it has replaced newspapers with computers.
With personal computers, management at the Cleveland-based bank has found it is able to perform the same function faster and more efficiently.
And in the process, it has been able the reduce the time it takes to complete the portfolio valuation from two to three weeks to 15 minutes.
"It is our job to get a handle on all of the assets that the decedent owned and place a value on them at the time of death in order to get through probate," said David Kemme, vice president, manager of trust probate. "In order to do that, we must provide an accurate accounting of all of the securities that are owned before we file taxes and before we begin distribution of the estate."
While the probate function is just a small part of the bank's trust department, it has a lot of responsibility and strict government guidelines to follow.
Because it often takes a few weeks from the date of death to the time the bank begins to administrate the will, Mr. Kemme is forced to use historical data to calculate prices, accruals, splits, and dividends of the deceased's securities portfolio.
"The bank is named as executor because a person has no one else to name to the position, the person does not trust the rest of their family, or their assets need special management and investment planning," said Mr. Kemme. "In some cases, the estates are so large that the person needs an organization with deep pockets to handle the affairs and they come to the bank because of the services we can provide."
National City, is the $9 billion-asset lead bank of National City Corp.
Most of the estates the bank handles are placed into a trust upon death. This allows the family to reduce taxes, insures the assets are not wasted, and, in some cases, creates a legacy for the deceased.
"Many times people use trusts because they don't want to leave money to a young person who will go out and buy the biggest car they see or [who] want to insure their family's livelihood remains secure," Mr. Kemme said.
"People want to make sure the money is managed and used for the right purposes."
Once the person dies, the bank takes over to manage the trust with the goal of generating income.
The earned income is distributed according to guidelines outlined by the deceased.
"In some cases principal assets of the trust are used to insure the dead person's spouse or children are able to maintain a certain standard of living," said Mr. Kemme. "We follow standards and guidelines that the person has set up as part of our agreement as the trustee of the deceased estate."
When National City files estate taxes, the returns are based on the value of the estate as of the day of the person's death. To do that, the bank needs to have a clear picture of all of the deceased's assets.
We have to take a snapshot of the person's financial position to determine the value of the estate," said Mr. Kemme. "One crucial part of this function, depending on the size of the estate, is to place a date-of-death value on securities."
To do this the bank needs to look at historical records of the various stocks and calculate the value of the securities at the date of death.
The bank previously used old copies of The Wall Street Journal to get the information - an often tedious and lengthy process.
"When we were using the old newspapers it often took us weeks to get all the information compiled and then another week to put it all together," said Mr. Kemme.
Now, the bank uses a PC-based system called Estate-Val from Estate Valuations and Pricing Systems Inc., Santa Monica, Calif. The system, using a 486 machine and a standard modem, dials into a pricing service to create a report that documents the value of the portfolio at the time of death.
Andrew Mayer, senior manager of financial services industry consulting at Ernst & Young, said: "In the last year or so, as people are moving toward local area networks, they have started to work with smaller companies who make software that can help the process."
Mr. Mayer added, "People have realized that there is a unique opportunity to work with small firms who make tools which can benefit large organizations."
National City has been using die system for just over three years. Mr. Kemme estimates the system costs under $500 per installation. The bank already had the necessary PCs installed.
"It is my job to collect all of the stock [value] based on the number of shares," said Mr. Kemme. "I don't need to know what is in the portfolio before the death because the system has all of the historical price information online."
"For the most part, we don't know the value of the estate until after the person dies," he continued. "In some cases where we have been working with the customer for a very long time, we have some idea of what it is worth but usually we find out after the person dies."
Once a clerk enters the names and number of shares of the stocks along with the date of death, the system gets the historical information and prints out a report that documents the portfolio's value.
"All we have to do is find out what securities the person owned, enter the list into the system, and in less than two minutes time, we have the date-of-death value," said Mr. Kemme. "It keeps us from having to go to outside pricing services or taking the time to look through back issues of The Wall Street Journal to get the information and calculate it manually."
Once the person dies, Mr. Kemme goes out to the family and meets with them to discuss the process leading up to the distribution of the estate.
In most cases the bank begins the process of distribution two to three weeks after the individual dies.
