Valuing Assets in an Estate & Legal Considerations
Once you have identified and collected the assets in the decedent’s estate, you will want to determine the value of the assets. This is generally required by the probate court and also will be helpful in determining whether the estate owes federal or state estate tax. Also, beneficiaries may want to know about the value of the share that they are receiving and the taxes for which they may be liable. In some cases, a valuation reveals that an estate may qualify for a small estate version of probate. This can make the process of distributing assets simpler and more efficient.
Valuing Real Estate and Vehicles
You can enlist real estate agents to provide you with an estimate of a property’s value. They may be able to compare it to similar homes in the area and evaluate the state of the market from a seller’s perspective. If you want a more thorough analysis, or if the property has a commercial use, you can hire a real estate appraiser through an agent, broker, or bank. An appraisal comes with some cost but should be pursued promptly because property values can change after the decedent’s death. You should record not only the fair market value of the real estate but also the equity in it, which involves collecting information on the mortgage.
If a vehicle has special intrinsic value, such as an antique, you may need to get an expert appraisal. Otherwise, for a typical used car, you can check the Kelley Blue Book at kbb.com for guidance.
Valuing Securities, Life Insurance, and Annuities
To get an estimated value of stocks, you can either ask the firm that managed the decedent’s investments or consult a newspaper for the prices of the stock on the date of the decedent’s death. (You would then need to average the lowest and highest prices.) For bonds, you can do something similar and then add accrued interest that was due but not yet paid when the decedent died. For life insurance, you will want to add the value of a policy on the decedent’s own life to the value of any policy insuring someone else’s life, such as a spouse’s life. The value of a policy insuring someone else’s life should be measured by the cash value of the policy, which is relatively small, rather than the amount of the proceeds. For annuities, you can contact the company that sold them and get a valuation as of the date of the decedent’s death. This may be a very small amount or nothing.
Valuing Businesses
You will need to contact a professional appraiser to value the tangible and intangible assets of a business. This will be important if you need to file a federal estate tax return. If the decedent owned a share in a limited partnership, you can review the agreement to find out the extent of their interest. Then, you can retain a CPA or contact the partnership to estimate the value of their interest.
Valuing Personal Property
If the decedent owned valuable artworks or antiques, you can get an expert valuation by contacting an art museum or an auction house. You can also review similar items at eBay to get a sense of the price that they would secure on the open market. The American Society of Appraisers or the Appraisers Association of America may provide assistance as well. These appraisals can be expensive, so you should pay the appraiser by their time rather than a percentage of the asset’s value.
Valuing Debts
After valuing all of the estate’s assets, you will want to identify and value all of the debts that the estate owes. Debts that are not attached to a certain asset must be paid by the estate, while debts that are attached to a certain asset probably will be passed to the new owner of the asset when they receive it. Some common types of debts include credit card debts, mortgages, utilities, loans, and expenses associated with the decedent’s final illness. You should make a note of the creditor, the amount of the debt, and the date of the next payment.
