Five Appraisal Options for First-Time Estate Executors
Estate executors should not attempt to value artwork. Get an expert opinion.
My friend Stan showed me the inventory that he’d just completed for his uncle’s estate. He was proud of his thoroughness; he claimed to have spent more than 150 hours compiling the inventory and acquiring valuations for the estate’s personal property. I complemented him on his meticulous work. As he drove away I grinned and shook my head, knowing that he could have had the entire inventory and valuation done in fewer than 20 hours on that particular estate, (including typing the report!).
Stan made the mistake that many first-time estate executors make: too much detail in the inventory report. He made the job harder than it needed to be. If Stan was employed fulltime rather than being retired, I’m sure he could not have devoted as much time to this inventory.
An important part of the estate’s settlement documents, the inventory of tangible personal property is the most time-consuming to prepare. The value of most estate assets (stocks, bonds, bank accounts, insurance policies, etc.) can be determined by simply looking at the latest statement. The value of personal property, though, has to be researched, and that can be time consuming.
Federal and state governments generally require that an estate’s tangible personal property inventory be listed in “reasonable detail.” So, how much detail is reasonable? Well, the government doesn’t care about the specifics of what Stan’s uncle owned; they don’t want a list of all his pots, pans, videos and CDs. All they care about is how much the estate was worth on the day of his death so that they can collect taxes on that amount. An executor’s focus should be on providing such values, but for groups of items, not individual items. Most jurisdictions consolidate tangible personal property into general categories, such as “vehicles,” “equipment” or “furniture & furnishings,” and the executor then calculates a total for all the categories. High-value items, such as collections, are typically listed separately. You’ll find the categories listed on the filing form. Whatever categories are listed is sufficient detail for the report.
Don’t mess with items no one will buy. Just throw away items with no value.
Executors will, however, still need to do a walk-through of all rooms in all buildings and around the property to note the value of what is there. The best and fastest way to get this done is to do a walk-through with an appraiser or an estate auctioneer. As you go, separate the valuable property that may need a full appraisal. For the rest, the appraiser can provide you with a “professional opinion of value” (POV) and the dollar amount provided will satisfy the valuation requirement for that category. If you don’t think the estate can afford these professional services, then you can do it yourself—with some restrictions. We’ll examine an executors appraisal options below.
What exactly should be valued? Not all estate assets go on the inventory; anything that will pass to an heir independent of a will (such as joint tenancy property; life insurance benefits; annuities, retirement plans; and assets in revocable living trusts) can be skipped. Not all personal property has to be listed, either. Since inventory requirements vary among jurisdictions, the level of detail needed for any particular inventory should be discussed with an attorney. But, in 30 years I’ve never seen a filing form that required a list of individual personal property items.
High-end items will need a professional appraisal.
Some estate appraisers argue that everything should be valued and “cashed out.” I take exception to that; instead, let common sense prevail. Some even encourage executors to redeem scrap metal at a recycling center and add those few dollars to the total. In my opinion, doing so is a waste of time. Why spend $25 in gas and hours of work to redeem a few dollars’ worth of scrap metal? That’s simply foolish. It’s better to rent a dumpster and throw all the unusable clothes, trash and junk into the dumpster. Trash and junk has no value, so don’t put it on the inventory. My friend Stan inventoried items that were going to be thrown out; it’s no wonder the paperwork took him so long to complete.
A note of caution: before inventorying personal property, executors should check the credit card statements and loan documents to see if there are any liens on the personal property. The debts for which the liens are filed will have to be paid anyway, but one doesn’t want to sell the super-duper-riding lawn mower only to find out after it was sold that Sears had a lien on it and the mower didn’t sell for enough money to cover the debt.
Be certain there are no liens on personal property. Go through credit card receipts to make sure.
If an executor has an inventory but no values, here are some valuation options:
1. Hire a personal property appraiser for an on-site appraisal. An appraiser will be needed for antiques, collectibles, artwork, jewelry and other expensive items. Not all appraisers are experts in all types of property, so be sure to ask if she can provide what is needed. An appraisal is a legal document that must follow the format of the Uniform Standards of Professional Appraisal Practice (USPAP). For these services, expect to pay about the same hourly rate that one would pay a local accountant;
2. Hire an auctioneer to provide the auction value (liquidation value) of the estate’s property. The dollar amount provided is considered a POV and does not carry the same weight as an appraisal, so don’t use an auctioneer for the collectibles and jewelry. Although he will certainly have an opinion for the value of those items, POVs don’t have to conform to the same standards as an appraisal. An auctioneer’s opinion should cover about 95 percent of the estate’s personal property;
3. Bring in a specialist. If there is farm or other heavy equipment, specialized trade tools or other uncommon high-value items, one may need to bring in someone who specializes in these items. The value provided will be a POV. Don’t bring in “experts” who might have an interest in buying the property that they will inspect; they will low-ball the value hoping that they can strike a deal to purchase the item. If the executor determines that an appraisal is needed, then he should hire an appraiser, and the appraiser may in turn hire the expert to advise him;
4. Get an online valuation from a qualified expert. Online valuations are relatively inexpensive and can provide an executor with the information needed. Since online valuations are limited to inspections of photos and descriptions provided by the executor rather than a physical inspection of the objects, these are considered to be POVs. If you choose an online appraiser, be certain that he is qualified to value items in the category needed. WorthPoint, for example, engages a wide range of specialists to perform their valuations; with WorthPoint, you can be certain that the appraiser assigned to your case is qualified to do the appraisal;
5. Do-it-yourself. This is the least-desirable option, but it can be done for all estate personal property except those where a professional appraisal is needed. The IRS won’t take an executor’s opinion for the value of artwork; for example, even if the executor is an expert in the field (it’s a conflict of interest). In fact, for such items they won’t accept a POV, either.
Inventorying and valuing tangible personal property is the most time-consuming task that an executor has to complete. Savvy executors will bring in all the help they need and get the job done quickly. As John Heywood said, “many hands make short work.” That’s good advice.
Wayne Jordan is a Virginia-licensed auctioneer, Certified Personal Property Appraiser and Accredited Business Broker. He has held the professional designations of Certified Estate Specialist; Accredited Auctioneer of Real Estate; Certified Auction Specialist, Residential Real Estate and Accredited Business Broker. He also has held state licenses in Real Estate and Insurance. Wayne is a regular columnist for Antique Trader Magazine, a WorthPoint Worthologist (appraiser) and the author of two books.
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