Estate Tax Planning Valuations
Estate tax planning is the process of structuring how assets pass to heirs so that the transfer occurs on the family’s terms rather than the tax code’s. When the assets involved are not publicly traded, that process depends on a defensible appraisal. The value assigned to a closely held business, a partnership interest, or a fractional real estate stake determines how much exemption a gift consumes, whether a trust funding holds up under examination, and how much of the family’s wealth survives the transition.
Appraisal Economics provides independent valuation services for estate and gift tax purposes. We appraise the asset, document the analysis, and support the conclusion if the IRS or a court asks how we reached it. Valuation is the only service we offer, so no audit relationship, advisory engagement, or other business line can influence the number.
What Is Estate Tax, and What the 2026 Rules Say
The federal estate tax applies to the transfer of a decedent’s taxable estate above the basic exclusion amount. For deaths occurring in 2026, that amount is $15,000,000 per individual, up from $13,990,000 in 2025, and the annual exclusion for gifts remains $19,000 per recipient (IRS, tax year 2026 inflation adjustments). The One Big Beautiful Bill Act set the estate, gift, and generation-skipping transfer exemption at that level with no scheduled expiration, eliminating the reduction scheduled by the Tax Cuts and Jobs Act for January 1, 2026. The amount continues to be indexed for inflation.
Beyond headline figures, two key considerations remain essential. To start, state tax liabilities persist: twelve states, along with the District of Columbia, assess an estate tax, while five enforce an inheritance tax, with many setting thresholds far below the federal limit (Tax Foundation). Furthermore, because exemptions apply strictly to asset valuation, establishing a precise fair market value remains indispensable regardless of increases in thresholds.
Who Needs an Estate Tax Planning Appraisal?
A qualified appraisal is needed any time illiquid assets move as part of a gift, a trust funding, or a taxable estate. In practice, that means:
- Business owners planning succession
A closely held company passing to the next generation needs a supportable value as of the transfer date, not a figure derived from a rule of thumb or a prior transaction.
- High net worth families and their advisors
Estate planning attorneys, CPAs, and private wealth managers engage us when a plan involves family limited partnerships, an LLC, a GRAT, a QPRT, or fractional interests in real property, and the valuation has to withstand scrutiny years after the return is filed.
- Executors and fiduciaries
Federal estate tax returns require appraised values as of the date of death or, if elected, the alternate valuation date six months later. Executors carry personal responsibility for the accuracy of what gets reported.
- Families with state-level exposure
A family in a state with its own estate tax may have watched federal exposure disappear while state exposure stayed exactly where it was.
- Anyone revisiting a pre-2026 transfer
Trusts funded and gifts completed between 2022 and 2025 to beat the anticipated sunset all still stand. What deserves a second look are the valuations and basis positions underneath them, because they were calibrated for a deadline that never arrived.
How We Approach Estate and Gift Tax Valuations
Every engagement runs through the same four stages, because a valuation that will be read by the IRS has to be built to be read by the IRS from the beginning.
1. Define The Assignment
We establish the purpose of the appraisal, the valuation date, the interest actually being transferred, and the applicable standard of value. Defining these elements is far more than a mere technicality, since identical ownership stakes can yield vastly different values depending on whether the valuation reflects a gift transfer date, an estate date of death, or terms set by a buy-sell agreement.
2. Value The Underlying Assets
Before any discount is considered, we value what the entity actually holds. That means appraising the operating business, real property, machinery and equipment, securities, and intangibles on their own terms. Because we appraise all of these in-house, the entity-level conclusion rests on consistent methodology rather than on a stack of third-party reports prepared to different standards.
3. Determine And Support The Discounts
Gifting serves as both a business succession tool and a means of preserving family wealth from unnecessary taxation, and it can be further leveraged through well-supported valuation discounts. The operative question in any plan is how much of a discount the specific interest supports for lack of control and lack of marketability.
There is no software that produces the optimal applicable discount for a minority interest. A percentage that fits one estate situation may not fit another, and a discount accepted in one jurisdiction may not be accepted in another. We derive each one from the governing documents, the transfer restrictions, the distribution history, the asset mix inside the entity, and empirical evidence on comparable restricted interests. Every conclusion is built on the specific economics of an interest.
4. Document It For Examination
IRS scrutiny of estate and gift structures concentrates on whether the structure serves a legitimate business purpose, and whether the valuation is accurate and supportable. Inconsistent or aggressive discounting is a well-recognized audit trigger.
So it is imperative to document the economic features of the assets placed in any vehicle that gives rise to a discount. A well-supported and documented appraisal report articulates the reasonableness of the valuation conclusions, which is what makes it useful years later in an examination or a courtroom. If the conclusion is challenged, the same team that reached it can defend it.
Structures we regularly value
- Family Limited Partnership (FLP)
- Limited Liability Company (LLC)
- Grantor Retained Annuity Trust (GRAT)
- Qualified Personal Residence Trust (QPRT)
- Fractional interests in real property
- Estate and dynasty trusts
Assets We Value for Estate and Gift Tax Purposes
Most families with a complex estate hold more than one type of asset, and engaging separate vendors for the business, real estate, and equipment adds cost, delays, and inconsistencies across reports. We appraise all of it within a single engagement, including the tangible assets that many pure-play valuation firms do not cover.
- Buy/sell agreements
- Closely held businesses
- Commercial real estate
- Contracts and leases
- Customer lists
- Financial damages
- Machinery and equipment appraisal
- Majority and minority interests
- Natural resources
- Options and warrants
- Partnership interests
- Patented technology
- REITs and REIT interests
- Software
- Special-purpose properties
- Split-dollar agreements
- Research-and-development-stage technology
- Trade names and trademarks
- Unimproved land
Why Advisors and Families Choose Appraisal Economics
Appraisal Economics has valued businesses and business assets since 1989, across thousands of engagements. We work closely with attorneys, accountants, and financial planners, often as the valuation arm of a plan they have already designed.
Our team includes CFAs, CPAs, ASAs, certified appraisers, economists, engineers, and finance professors, and co-authors of valuation textbooks are on staff. We provide expert witness testimony when a valuation is contested.
Valuation is all we do, which means there is no audit practice, no investment banking arm, and no advisory relationship competing for attention or creating a conflict. Every dollar of an engagement fee goes toward the quality of the report.
Tell us what is being transferred and when, and we will tell you what the appraisal requires, what it will cost, and how long it will take.
Estate Tax Planning Valuation FAQs
What is the estate tax exemption for 2026?
The basic exclusion amount is $15,000,000 per individual for estates of decedents dying in 2026, up from $13,990,000 in 2025. Through portability, a married couple can shelter up to $30 million. The One Big Beautiful Bill Act removed the scheduled expiration date, and the amount continues to be indexed to inflation. State estate and inheritance taxes are separate and were not affected.
When does the IRS require a qualified appraisal for a gift or estate?
Any time a transferred asset has no readily ascertainable market value. That covers closely held business interests, partnership and LLC units, fractional real estate interests, intellectual property, machinery and equipment, and similar holdings. Reporting a value on a gift or estate tax return without a supporting appraisal leaves the position undocumented if the return is examined.
How are the lack-of-control and lack-of-marketability discounts determined?
The determination of these discounts rests on the unique economic characteristics of the interest in question, including voting rights and governance, operating agreement transfer limitations, historical distributions, entity asset composition, and empirical market data for similar restricted holdings. Because supportable percentages vary from case to case, a discount justified for one entity cannot simply be applied to another.
How does a valuation for estate tax purposes differ from a sale price?
While a sale price reflects what a specific buyer agreed to pay in a particular transaction, fair market value for estate and gift tax purposes is defined by tax regulations as the price a hypothetical willing buyer and willing seller would negotiate, with both parties fully informed and acting free of compulsion. This distinction carries significant practical implications. While a strategic purchaser might pay an added premium for operational synergies, a family relative might buy at a discount, yet neither negotiated transaction necessarily sets a fair market value.
Beyond buyer motivations, two additional distinctions separate fair market value from an actual sale price. First, interest-specific adjustments mean that a minority interest transfer is appraised as a standalone partial stake rather than a simple prorated share of the entire enterprise. This allows for discounts for lack of marketability and lack of control, which would not apply to a full business sale. Second, valuation timing is strictly locked to the exact transfer date or the decedent’s date of death. Consequently, a market transaction closing months or years before or after cannot serve as a direct benchmark, as it inevitably incorporates subsequent economic changes that the official tax appraisal must exclude.