Current Issues in Valuing Estate Assets

Tax Professionals' Resource
September 17, 2013 — 1,443 views  
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Accurate valuing of a client's assets is important in many contexts as it plays an important role in transferring assets or using the value of them as an advantage. Valuing estate assets such as properties and investments is easier than ordinary possessions or furniture. The transfer tax system poses issues where these assets are concerned.

Assets That are Included in the Probate Fees

In case of a will, the executor can apply for a grant of probate that gives access to the deceased's assets. In order to do that, all of the intangible and tangible assets must be valued. If they do not fall under the category of low-value estate, a grant of representation needs to be applied for before probate is granted. The inheritance tax needs to be paid and debts owed by the estate to be cleared before the estate assets are distributed according to the will.

Probate assets include what was individually owned by the deceased. This could include vehicles, property, furniture, investments, money in the bank, personal belongings etc. Non-probate assets may include life insurance policies, jointly owned properties or businesses etc. But these need to valued in case complications arise. Even an estate that has been donated with ownership interest needs to be valued to see if it is exempt from inheritance tax.

Determining the Value of the Assets

The first step to determining the value of assets is finding out what its realistic selling price is. It may be lower than the insurance value. Valuation can be complicated as it is dependent on the type of asset. In such a case a professional valuer needs to be hired to get an accurate value of the estate assets. Zonal and environmental issues may affect the value of a property and need to be looked into.

An expert might also be required for the valuation of intangible property, especially if there is no formal documentation. Most personal belongings can be publicly valued and do not require to be looked into especially. Gifts and giveaways that aren't exempt from tax are included as well.

Once the assets are valued, the debts owed by the estate must be deducted and recorded. The inheritance tax is then calculated before estate reporting.

Avoiding Probate Fees

Careful planning can help avoid probate fees without interfering with the wishes of the deceased. Assets that do not pass through the estate are exempt of probate fees. These include joint ownerships as the asset is automatically passed on to the surviving owner. The best way to avoid estate assets is to appoint a Payable on Death or Transferable on Death. This can be used for vehicles, savings and credit accounts, annuities, retirement savings and even property. Each of these have different procedures and rules that must be adhered to.

Another solution is to set up a Revocable living Trust where a successor can be appointed beforehand who is given the authority to dispense it according to the outline of the trust.

These methods work depending on the unique financial and family situations of an individual.

Tax Professionals' Resource