Estate planning can be a complex process that includes identifying the value of assets within an estate. Properly valuing those assets helps ensure an accurate distribution according to the wishes of the estate holder while minimizing the potential for disputes among heirs. It also allows for efficient tax planning and can help reduce estate taxes and liabilities. Finally, a precise and accurate asset valuation helps in complying with legal and regulatory requirements, avoiding potential penalties or complications. Below are details about a few key areas to consider.
Estate and Gift Taxes
The most obvious answer is to determine if there will be an estate tax liability upon death and to ensure there are funds available to satisfy such taxes. This is important, otherwise some assets intended for heirs may need to be leveraged, or even worse, sold. This cannot always be done equitably across all the estate beneficiaries.
Accurate Values for Fair and Equitable Distribution
One major concern is usually ensuring a fair and equitable distribution of assets among the estate beneficiaries. A valuation prepared by a professional provides an accurate and impartial assessment of the value of all estate assets, including businesses, real estate, investments, and personal property which might include valuable art and collectibles. This is necessary to avoid disagreements among heirs and to ensure that your wishes are carried out as you intended.
Business Interests: For those with business interests, determining the value of a business is often quite complex. Professional valuation organizations have the expertise to determine the fair market value of a business, considering factors such market power and position, earnings potential and other factors including the owner’s eventual exit from the business. This is crucial for both estate tax reporting and the equitable sharing of the business among the heirs.
Handling Unique, Illiquid and One-of-a-kind Assets: Estate planning can involve unique or illiquid assets, such as art, antiques, debt instruments and more recently intellectual property. Professional valuation organizations have the specialized expertise to accurately value these types of assets, ensuring that they are appropriately accounted for in the estate planning process.
The Need for Reassessment at Regular Intervals for Changes in Value: Asset values can change over time due to economic conditions, and other factors. The regular reassessment of asset values by a professional is important to ensure the estate plan is current and reflective of the genuine value of the assets. This helps in maintaining accuracy, fairness and equity in the estate plan over time.
The process for pursuing a valuation of estate assets typically begins by gathering a comprehensive list of all assets in the estate, including real estate, investments, personal property and business interests. Once that is accomplished, an appraiser, accountant, or financial advisor may be consulted to assess the fair market value of each asset. Some professionals, including several of my colleagues at CBM, hold the Certified Valuation Analyst (CVA) designation, reflecting a professional who holds a CPA, has passed a rigorous, knowledge-based exam and who demonstrates substantial valuation experience in compliance with the requirements of the National Association of Certified Valuation Analysts. Once the valuation has been completed, the estate holder should receive detailed documentation and a report to ensure an accurate and legally sound valuation has been performed for estate planning or probate purposes.
For more information, contact Tom Burton via our online contact form.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
