Planning, establishing and maintaining an estate can be quite a handful of responsibilities, none of which should be taken lightly. One of the more arduous elements of maintaining one’s estate can be the process of valuing an estate once the owner of the estate has passed away, which is necessary for the purposes of complying with federal estate tax laws. For those who are considering how to best go about valuing an estate, the IRS offers two viable standards it recognizes.
The first value which can be assessed for an asset is the “date of death” value, which is exactly what it sounds like. This is the determined fair market value of an asset on the date that decedent passes away. Since we’re talking about tax laws and financial matters, of course things can get more complicated. For assets such as bank accounts, retirement accounts and investment accounts, this means the statement values on the date of passing.
When determining the value of a stock portfolio, the average of the value of all stocks is multiplied by the total number of stocks in the portfolio on the day of passing, unless the decedent passes away on a day when the stock market is not open. In this case, the average stock prices for the days directly prior to and following this day are used. Other assets, such as real estate, business interests and personal property are subject to appraisal.
It is also possible to use the “alternative valuation date” method to determine value. This means claiming the value of the assets six months after the date of the decedent’s passing. This can be particularly helpful if certain assets lose significant value in the six months following the decedent’s death, but it also requires all assets to be claimed at the later date’s value. Because of this rule, you are not allowed to claim the value of some assets at their date of death value while claiming others at their alternative valuation date value.
Creating an effective estate plan can be a lot of hard work, but it can also be very rewarding. If you have further questions about how to make the most of your assets and legacy, an experienced estate planning attorney can help guide you.
Source: The Balance, “Do You Know How to Calculate the Value of Your Estate?,” Julie Garber, accessed Oct. 04, 2016