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Determining the Value of Assets within an Estate Plan

Determining the Value of Assets within an Estate Plan
July 21, 2016 Shannon Dawes
Valuation of Assets within an Estate Plan

When a loved one dies, there are many tasks that must be undertaken, which might include funeral arrangements and administration of the estate. These matters can be difficult especially at a time when family members are coping with the grief associated with the loss of a loved one. Although there are many complicated tasks to be performed when administering an estate plan, valuation of the assets of an estate can be one of the most difficult, depending on the type of assets that comprise the estate. The task of evaluating the worth of specific assets and the net estate before distribution of the estate assets to a charitable organization and/or loved ones can present special challenges. In this blog, our Columbus estate planning attorneys provide an overview of approaches to evaluating specific estate assets.

Closely Held Business (Family Business)

Whether you have an ownership interest, such as shares of stock, in a closely held business, the value of the stock can be difficult to determine since it is not publicly traded on an exchange. The evaluation process for stock in a family business should include a range of factors, such as:

  • Book value of the stock
  • Annual dividends to stakeholders
  • Estimated profit capacity for the company
  • Fair market value of stock in similar companies that are traded publicly
  • Economic environment and industry outlook
  • Characteristics and history of the business
  • Price of recently sold business stock

If the decedent is only a minority shareholder without a say in daily business operations or the ability to force a sale or liquidation of assets, a discount in the valuation process might be appropriate.

Valuation of Commercial or Residential Property

In most cases, the value of real property will be equivalent to the fair market value (FMV) of the residential or commercial property. Factors relevant to the determination of FMV include:

  • Characteristics that make the property unique
  • Size, age, and condition of buildings on the property
  • FMV of comparable property in the vicinity
  • Probate court valuation (if applicable)
  • Zoning laws
  • Costs of repairs/remodel to make property marketable
  • Size and location of the land tract
  • Net revenue generated by investment property
  • Fitness of property for existing or anticipated use

If multiple owners have an ownership interest in the property, the IRS might grant a discount in the value for estate planning purposes if the other owners are not closely connected (e.g. business associates or family members).

Ownership of Annuities

Fair market value also will be used to determine the worth of annuities for estate tax purposes. If an insurance company provides the annuity, survivor benefits will be calculated based on the premium for a single life annuity based on the survivor’s life on the date of the death of the deceased. The value will be the present value of future payments in the case of a private annuity.

Collectibles and Antiques

If a person’s estate includes collectibles or antiques, the difficulty of valuing these assets can be eased by keeping any appraisals or purchase records with your will or living trust. In the absence of such documents, an appraisal might be necessary to determine the value of these types of items, especially if they are particularly rare or unique.

If you have questions about estate planning issues in Ohio, we invite you to contact us to schedule a consultation. Our Columbus estate planning attorneys at Dawes Legal, LLC can offer assistance with specific estate planning documents or a comprehensive estate planning experience. We invite you to call us today at 614-733-9999 for your free consultation.