The personal representative (executor) has all sorts of responsibilities in probate. Some are relatively easy while others can create problems if not done correctly. By acting as the fiduciary of the estate, a Tennessee executor must always make decisions that are best for the estate. Overvaluing or undervaluing estate’s assets can violate this duty. Let’s take a look at what it takes to determine the value of estate assets and how they can be valued to ensure you are protected.
Tennessee probate requires the total value of all assets in the estate. The value of these assets affect the following areas: whether probate is required and what type, taxes owed by the estate, how assets should be allocated to heirs, and what the cost basis for the assets will be once sold.
Assets are valued according to the date of the decedents passing and again once they’re sold or assigned.
The value upon death sets the cost basis for the eventual sale of the asset, and can also be helpful in estate tax calculation for large estates.
The assets are valued again upon sale or the distribution to the heirs. The value is likely to have changed from the first valuation, since the probate process can take months to years to complete. The updated value is used to calculate state inheritance tax owed by the heirs if the asset is passed down and the estate income taxes when the asset is sold.
There are two types of value that are assigned to the estate. The gross value is the total of all asset values. This number can present an inflated view of the estate’s worth.
All debts can be subtracted from the gross value to reveal true worth of the estate, called the net value. When there are no debts or payments, the gross and net value of an asset are the same. If an asset has a debt associated with it, such as a mortgage on a house, you typically log the gross value of the house and list the mortgage debt on its own.
As executor, you are required to submit the total GROSS asset value to the court in Tennessee. Any assets with assigned beneficiaries such as life insurance policies, IRA’s, or trusts will bypass probate and are not included in the gross asset value.
It is critical to assign a fair value to the assets since heirs, creditors, or even the IRS could challenge your assessment. How can you do that?
Some assets’ values are obvious like bank accounts or investments. Other items like real estate, vehicles, jewelry, and art require market knowledge that you may not possess. In Tennessee, it is best to consult with a professional appraiser in the specific area if you are uncomfortable making the assessment. For example, real estate professionals who work in the market daily can provide accurate estimates to real property.
Getting a professional appraiser to help valuate specific items can be wise if the assets are unique. Find an appraiser with certifications and is a member of a professional organization. Have the appraiser provide a written estimate of the appraisal fee before hiring them. Don’t use an appraiser who intends to buy the asset from you.
Estate sale companies are the best at evaluating household contents. Furniture, tools, clothes, etc., have varying values and estate sale companies can “size up” the items based on their experience of what people are paying for similar items.
Probate and Real Estate Questions?
If assigning value to the estate is difficult for you and causes headaches, reach out to a professional for peace of mind. My background in engineering and construction gives me a unique understanding of real estate values and their potential. If you have any questions about probate or real estate give me a call at (931) 444-9360 or send me a message below. I will listen to your situation and put your needs first.