When a loved one passes away, no one really wants to focus on the practical and legal steps that must be taken shortly thereafter. If you were named as the Executor of the estate, however, you must do just that. One of the many responsibilities you will have during the probate of the estate will be to value the estate assets. Why is that important and how do you determine values? We’ll explain the process of valuing estate assets during probate.
What Is Probate?
Most people leave behind an estate when they die. That estate consists of all assets owned by the decedent, or in which the decedent had a legal interest, at the time of his/her death. This includes both tangible and intangible assets as well as both real and personal property. Eventually, those assets must be passed on to the new owners. Before that can happen though, the estate must be inventoried and valued, creditors must be allowed the opportunity to file claims against the estate, and all debts of the estate must be paid. All of that occurs during the legal process known as “probate.” If the decedent left behind a Last Will and Testament, any challenges to that Will are also litigated during probate.
Why Must Estate Assets Be Valued?
One of the many duties and responsibilities of an Executor is to value the estate assets. There are several reasons why estate assets need to be valued, whether formally or informally. Before you really get into the probate process, it is important to conduct an inventory of estate assets and arrive at a preliminary rough estimate of the entire estate’s value. The reason for this is to determine if the estate may qualify for an alternative to formal probate. Most states, including California, offer a small estate alternative to formal probate for estate’s that qualify. Although the eligibility requirements vary by state, most states put a monetary cap on the overall value of the estate. In California, for example, an estate valued at $150,000 or less in probate assets may qualify for a simplified probate process. Keep in mind that only probate assets count. Non-probate assets, such as assets held in a trust, proceeds of a life insurance policy payable to a living designated beneficiary, and certain types of jointly held property, bypass probate altogether. Assets also need to be valued to determine how to divide the estate if necessary or to sell assets if the estate lacks sufficient liquid assets to satisfy all claims. Possibly the most important reason to value estate assets, however, is to calculate federal (and sometimes state) gift and estate taxes.
Valuing Estate Assets
If you are the Executor, it is in your best interest to identify, locate, and secure estate assets as soon as possible. Doing so will help you to determine the required date of death values. Exactly how you obtain those values will depend on the type of asset involved.
With a bank account or investment account, the date of death (DOD) value is usually easy to establish if the account was closed shortly after the owner’s death. The closing statement should have daily balances on it that can provide you with the DOD value. For other assets, you will likely need to enlist the assistance of professionals. For real property, for instance, you may need a certified appraiser to provide you with a value. If the decedent owned any valuable collections (art, coins, etc.) you may need to locate a professional in your area. Likewise, business assets may need to be valued by an expert appraiser. The sooner you get started with this particular undertaking, the more accurate your DOD values will be and the less you will need to worry.
Contact a Roseville Probate Attorney
Please download our FREE estate planning checklist. If you have additional questions or concerns about how to value assets or other issues related to the probate of an estate, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.