No matter how hard we try (and let’s be honest, most of us don’t at all) it is extremely valuable to create and maintain a list of your personal assets. It’s not done just to be organized or feel good about yourself. In fact, it’s not about you at all. It should be done for those who will need to disperse your assets when you die. Wherever you are right now, pause and look at your surroundings including your person. How much is just within your immediate view? Jewelry? Credit cards? Collectibles? Even just clothes, kitchen dishes, or your tv. Everything has to go somewhere when you are gone.
If you’ve created an inventory and established the right estate planning documents, decisions are mostly made. If you haven’t, well, your family might be grumbling at you a bit when you are gone, or worse, you might be setting them up to grumble at each other.
After a death, valuing assets is one of the first things that should be done. An after-death valuations serve three purposes. First, it forces an inventory. You can’t value it until you know it exists. Second, it allows you to determine the estate tax due (if any) and maintain records if this is ever disputed. And third, it allows for you to determine the basis in the hands of the heirs to reduce or possibly eliminate any possible capital gains taxes on the sale of assets. See how much effort you can save everyone by having a comprehensive list prepared?
Without a list, valuation starts with knowing what assets the decedent owned or controlled. The better your inventory, the better chance your family has with achieving not only a good valuation, but a smooth estate administration. Leaving them a spreadsheet (who doesn’t love a good spreadsheet?) or a notebook eases their effort mightily.
When you are called upon to conduct valuation for a decedent, it can be a little time consuming, but it doesn’t have to be costly. You will need many copies of a death certificate so be sure to request those (at least 10, maybe 20) from the funeral home. Begin by inventorying financial assets. List the banking institution, the account number, and the current balance. Note who the signors on the accounts are and any joint owners. Hopefully, most are in a Trust. Move on to investment assets and note balances (inventory must include what is owed as well). Identify the type of account and joint owners. Move on to real property and identify it by location and owners, paying attention to how the decedent held title. All of that shouldn’t be too hard. Now comes the fun part…all the stuff that makes up our daily lives. Cash and stocks get peoples’ attention, but I guarantee you that people fight over cookbooks and furniture, too. Jewelry tends to walk off and trinkets make their way to other houses. Take pictures of the assets. Note what you are planning on donating or selling in a garage sale. However, before you try to be the peacekeeper by letting someone have an item, you need to be sure it’s not called out to be given to someone else in the estate plan. You must play by the rules.
As you create the inventory, secure the assets. Make the banks and financial houses aware of the death advise them to not permit access to accounts. Change the locks on houses and store cars. Notify the insurance carrier that the estate should be the beneficiary and insured on the house and cars or other large or valuable items. Buy a safe and put portable valuables in it but don’t comingle with your valuables. If firearms are among the assets they may only be held by persons licensed to do so. If you do not have a license, notify the local police and have them take possession of the firearms.
Finally, it is time to value the assets. Generally speaking, valuation should reflect the value as of date of death. The Internal Revenue Code permits an optional valuation up to six months after date of death. Depending on the market for assets, re-certifying value at the six-month mark may provide a better valuation. Please note, that to elect this alternative valuation date you may be required to file a tax return.
With readily traded assets, valuation is relatively simple and can be accomplished by looking up values. With real property, a formal appraisal, and not a comparative market analysis is needed. With personal property, valuation may prove more problematic. In that event, you will have to weigh the cost of the valuation, the lack of certainty with the valuation, and the problem with attaining a valuation. For art, jewelry, coin collections, and other collectables, take the time to secure valuations. Consider the upfront cost of a valuation as dramatically less than the cost of litigating value. Assets of assumed nominal value (pots and pans) may not require valuation at all; but think before skipping it. If you decide to not formally value an item, at a minimum have heirs agree to the value of the item.
Knowing what you have in an estate is vital to a good estate administration. Knowing what it is worth is just as important. Take the time to create and inventory and put together a valuation. You and those you love will not regret it!