Posted in Triplett & Carothers on November 4, 2023
If you’re the executor of an estate, part of your job is to oversee the valuation of assets. Finding out how much the estate is worth and how that value is distributed will determine your approach to probate, the allocation of the assets among the heirs and how much the estate will pay in taxes. Particularly with larger estates, valuation can be a substantial responsibility. It may require you to bring in experts to value antiques and other collectibles.
If the estate is undergoing probate, you’ll need to submit the asset values to the court. Probate rules for estate valuation vary somewhat by state. In some states, courts look at gross estate value; in others, at net estate value. Some have separate rules for smaller estates. While all personal property is probated in the decedent’s home state, real estate is probated in the state in which it’s located. Some assets, such as 401(k)s that have beneficiary designations, normally bypass probate.
Expect to be challenged — by the IRS, by heirs, by creditors or by the court — whenever you value assets. Be sure you’re valuing everything reasonably.
Certain types of assets are easy to value. The contents of a bank account or shares of stock in a publicly traded company won’t give you any trouble. To value a stock, commodity or precious metal, average the highest and lowest selling price for similar items on the owner’s date of death. For mutual funds, use the closing valuation.
Other assets — a used car or collectible, for example — don’t have such a definitive value. You estimate their value by using public references for collectibles. When valuing real estate, you can check out the tax assessor’s valuation and talk to a real estate agent about sales of comparable properties.
Go with the pros
For assets that are really difficult to value, like artwork or a private business, you’ll probably need to hire a professional appraiser. Appraisers typically charge from $125 to $400 an hour, often with an extra charge for visiting the site. Avoid appraisers who charge based on a percentage of the asset’s value. This goes against the ethics of the Uniform Standards of Professional Appraisal Practice.
Ask whether the appraiser has any certifications or memberships in professional organizations, and ask for a written estimate of the appraisal fee in advance. Books, tools and appliances are among the items that can be listed as household contents, and you can ask for one overall valuation estimate for them. If there are individual items that were specifically bequeathed in the will, you may want to get an individual appraisal for each. The value of household items should be done based on what a buyer would pay for the items as is.
The heirs may decide to sell everything in an estate sale. In that case, use a reputable estate sale company. Descriptions and values should be seen as general guidelines because there are variations in quality and condition as well as changes in economic conditions and local demand.
As you proceed with the valuation, be aware of the pitfalls. Heirs may be upset if a particular asset doesn’t realize the value they expected. Document your work in case there are questions later, and work closely with legal and financial professionals as you move forward.