Valuing an estate is a tricky process. The IRS provides some guidance for individuals required to make a filing for a decedent who has died after December 31, 2012 in its instructions to Form 706 entitled United States Estate (and Generation-Skipping Transfer) Tax Return. Individuals charged with the duties of executor for the individual decedent’s estate must file this notification within 9 months after death has occurred for an estate that is currently valued in excess of $5.25 million.
The limited guidance provided by the IRS addresses how certain assets of the estate are treated for the purpose of valuation. Appreciable assets, such as cash, securities, and other tangibles, or assets that may be easy to value pose little challenge when it comes to valuing your estate. Assets that are harder to value, or which have little to no readily available marketplace equivalents to be compared to, may quickly change the valuation of your estate. Here is a look at the estate valuation process as well as ways to decrease the estate’s value in order to be taxed more leniently.
Estate Valuation Process
Ideally, the valuation process for your estate should take place long before death occurs, usually in the form of an estate plan. A planner will work with a qualified appraiser and other professionals to look at all that you own, including real estate, investments, and other items, and make a determination of the estate’s current value. The valuation should be reviewed no less frequently than annually in order to account for the inclusion of new assets and removal of others that may affect the overall value of your estate.
Determining Your Estate’s Value
When it comes time to value your estate, partnering with a professional appraiser will ensure that the value is determined correctly. There are many factors to consider when valuing your estate, and when you partner with a professional, they know what to look for and how to properly value it. For example, if your estate has a few assets that could be difficult for the executor to determine the correct value, professional appraisers have the tools and the experience necessary to value those assets.
Choosing the right partner to assess your current estate in order to ascertain the value of your holdings is the best way to avoid any surprises for your heirs down the road. For those assets that may be highly unmarketable but trigger a taxable event upon death, consider the establishment of certain remainder or grantor trusts through an experienced estate tax attorney, in order to safely pass on the future value of those assets.
In addition, if you own a small closely held business that holds some proprietary patents, the value of those assets may not be known to you or your estate’s executor at the time of death, so it is important to have them appraised professionally. An appraiser can provide assistance in this area, especially one who is versed in the sale of assets of a unique nature.
When the time comes to determine the value of your estate, contact professionals who specialize in this area, contact Appraisal Economics today at www.appraisaleconomics.com