My own layman’s guide, born of my own experience and observations – Part 3

Everything that the deceased owned is an ASSET.

Some assets are easy to identify:  house, vacation house, rental property, furnishings inside the various houses, vehicle, antiques, gold bars, silver coins, “fine” jewelry/watches, “fine” artwork, “fine” china, etc.

Some assets are financial:  cash, bank account, annuity, 401K, IRA, mutual fund, bonds, etc.

Some assets are valuable, and need to be listed individually:  everything above.

Some assets only have sentimental value:  old worn slippers, costume jewelry, photos, framed jigsaw puzzles, ancient lawnmower, broken recliner, chipped dishes and glassware, stacks of magazines, drawers of letters, unfinished afghans, etc.

The executor has to take an inventory of ALL the assets! The executor also needs to determine the value of all the assets.  Valuable assets, such as houses, investments, businesses, art work, etc., will probably need professional appraisals.  There are 2 good reasons to do this.  First, this makes sure the executor does not lowball the values to prevent high estate taxes.  Second, it prevents the executor from manipulating the value of the assets in the event of in-kind distributions among heirs.

Another benefit of a legitimate appraisal is to keep the taxing authority from overruling your personal benchmark guesstimate.  Consider this sad, true story:  A large estate owned several acres in rural Medford, and somewhere in the paperwork the original preparers referred to the property as a “horse farm.”  Yes, at one time, horses had been kept with the ramshackle house on the good half of the property, but the back half of the property was wetlands.  An IRS estates auditor who had never heard of wetlands doubled the value of the estate which of course increased the taxes due.  The estate’s executor had to educate the auditor and battle the value back down.  One can only hope that a proper appraisal would have identified and explained the wetlands issue and saved that executor’s blood pressure.

The value of each asset should be at date of death, but you are allowed to use an alternate valuation date, up to six months after the date of death.  Generally, for most estates, this is more trouble than it is worth.  Getting everything valued (appraised) once is hard enough, without selectively repeating it at a later date.  However, in the case of a sudden market decline during those six months, it might be a worthy consideration.

As an aside, the older the deceased, the greater the likelihood there is cash stashed in pockets and between pages of books and underneath drawers, so it is necessary to go through everything carefully.  Most importantly, all the counting and appraising needs to happen before people start making off with things they knew Granny really wanted them to have.  It may not be a bad idea to change the locks.