Why Include an Appraisal in the Estate Planning Process?

Estate planning is an important part of financial planning, but it is often overlooked and misunderstood. The American Society of Appraisers offers the following tips about why to get appraisals in conjunction with estate planning, how to hire an appraiser and what to expect in the appraisal process.

Why get appraisals in connection with estate planning?

  • Appraisals of privately held business interests (stock, partnership units, etc.) are required by IRS regulations to support values claimed on estate or gift tax returns.
  • A professional appraisal provides the client some insurance against an IRS audit and professional support in case of audit.
  • The costs of appraisals are deductible expenses on estate tax returns and sometimes in estate planning (e.g., family limited partnerships).
  • Have a full appraisal report done on the most important pieces in your collection. An accredited appraiser can help determine which pieces require a full report. He or she can also help catalog and identify the rest of the collection.
  • Often the appraiser can assist an attorney in structuring an estate plan that will maximize the tax benefits for the client by providing the attorney with strictly a “value” point of view.
  • The appraisal can provide a benchmark of value for an asset or collection so that subsequent appraisals will illustrate the growth (or decline) in value.

Hiring an appraiser

Hire only accredited appraisers like those from the Appraisal Institute who abide by a code of ethics and the Uniform Standards of Professional Appraisal Practice (USPAP). The independence, expertise and experience of the appraiser are critical to establishing a credible value in an appraisal (and the IRS knows the difference).

Question whether the appraiser will provide a report that gives a fair market value of the collection that complies with the latest Internal Revenue Service requirements. (Replacement value for insurance is not appropriate for estate planning purposes and can yield a considerably different value.) Hiring an accredited appraiser will ensure that you get the correct value for the estate.

Divorce / Matrimonial support

Divorce proceedings require many decisions, especially when there is a real estate asset allocation to be agreed upon, such as the matrimonial home. We at Maher Appraisals are fully familiar with the requirements and procedures necessary to perform not only a current market value estimate but also, a retrospective appraisal estimating market value as at the date of separation. We will start the process by presenting the letter of engagement which discloses purpose of the report, intended use of the appraisal, appraisal standards and report format, limitation conditions and legal proceedings.

Maher Appraisals has the pleasure of serving numerous law firms that are specialized on family law in preparing matrimonial appraisal reports for the parties involved.

Source: “ASA American Society of Appraisers”