Determining Asset Value
Among the many duties you assume as an executor is determining the value of the estate’s assets. Asset values are used to determine the type of probate needed (if any), allocate assets among heirs, calculate taxes, and fix cost basis for future sales by the estate or its heirs.
Assets must be valued twice: at death and at disposition.
Value at death – assets must first be valued as of the date of the decedent’s death. This is important for estate tax calculation (for very large estates) and for determining cost basis when an asset is eventually sold.
Value at disposition – assets also must be valued when they’re sold or distributed. Settling an estate can take months, if not years, and the value of assets changes, sometimes dramatically, during that period.
Value at disposition is used to calculate estate income taxes if the asset was sold or to calculate any state inheritance tax due, which should be allocated to heirs if the asset was distributed.
Gross Value vs. Net Value
When calculating the value of an estate, the gross value is the sum of all asset values, while the net value is the gross value minus any debts (the actual worth of the estate). Gross value equals net value for most assets, but in some instances, an asset includes associated debt, such as real estate with a mortgage. In those cases, you should enter the gross value of the asset as its value and record the mortgage debt separately.
If the estate you’re settling is undergoing probate, you’ll need to submit asset values to the court. Assets with designated beneficiaries, like 401 Ks and life insurance policies, normally bypass probate and shouldn’t be included in estate probate value.
Probate rules for estate valuation can vary by state. Some states use gross value, while others use net value. An executor needs to remember that all personal property is probated in the decedent’s home state, and real estate is probated in the state in which it’s located.
As the person who valued the estate’s assets, you may be challenged by the IRS, heirs, or creditors on the value you assigned an asset. Therefore, you’ll want to be sure that you’ve reasonably valued all assets.
While certain assets are easy to value, like bank accounts or shares of stock, other assets can be more challenging, such as real estate, used cars, or collectibles. A real estate agent can assist you with real estate values by comparing similar properties, and the tax assessor’s valuation should also be considered.
Using a Professional Appraiser
A professional appraiser may be needed for jewelry, artwork, private businesses, and other assets you find difficult to value. Appraisers typically charge anywhere from $125 to $400 per hour, depending on the geographic area. Their rates may also be based on their level of expertise, and they may charge extra for a site visit. Appraisers who charge based on a percentage of an asset’s value should be avoided, as this goes against the Uniform Standards of Professional Appraisal Practice (USPAP) ethical requirement.
When hiring an appraiser, inquire about certifications and memberships in any professional organizations. To avoid any potential conflicts of interest, ask for a written estimate of the appraisal fee in advance and avoid hiring an appraiser who is also a dealer or offers to buy items for themselves.
There are also online appraisers, which can be faster and less expensive than working with a professional appraiser, but the appraisal won’t be as robust since the person valuing the asset didn’t have physical access to it.
Valuing Household Contents
Household contents is a broad category that can include furniture, books, gardening tools, appliances, tableware, etc. Instead of valuing each item individually, many executors list “household contents” as a single asset and provide an overall valuation estimate. Items that are particularly valuable, such as antiques, high-end artwork, etc., should be individually valued.
Valuing these assets can also be done through an estate sale, where you take what people are willing to pay for an item. Estate sales companies are available to help with this, which can help protect you from accusations of mismanagement.
Questions Concerning Probate and Real Estate?
Certain aspects of settling an estate, like handling an estate’s real estate holdings, may be outside your area of expertise or comfort zone. If in doubt, work with a professional.
If you have questions concerning probate and real estate in Tarrant, Parker, Wise, Collin, Denton, or Dallas County, contact David Pannell and Cities Real Estate. David has extensive experience helping families with their real estate needs before, during, and after the probate process.
David has been an agent/realtor since 2005. He has served as a United States Marine, City of Arlington police officer, and is a dedicated family man. You can trust him to put your interests first in any and all situations.
Call David today at (817) 797-9047 for help with your real estate and probate needs. You will be treated respectfully, and your requirements will be met efficiently and confidentially.
NTREIS data last updated December 2, 2023.