The Role of an Executor: Asset Valuation

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The role of an Executor, also known in some jurisdictions as a Personal Representative, encompasses a range of time-intensive and challenging tasks. Among these tasks is the critical responsibility of ascertaining the value of all assets within the deceased’s estate. This valuation serves two key purposes: it determines the estate’s tax liability to state and federal authorities and sets the basis for asset valuation for the estate’s beneficiaries.

 Choosing the Valuation Date

Executor

Assets of the deceased are typically valued at their fair market value on the date of death. However, executors have the option to select an “alternate valuation date,” allowing for the valuation of assets sold or distributed within six months post-death at their sale or distribution date. Remaining assets are valued six months after death, excluding those depreciating over time solely due to time passage rather than market fluctuations. This alternative valuation option can lead to a reduction in estate size—and consequently, estate tax—if the estate’s value decreases significantly within the six months following the owner’s death.

 Valuing Joint Tenancy Assets

For jointly held assets like bank accounts, valuation hinges on the account balance at the chosen valuation date. Only half of the asset’s value is incorporated into the deceased’s estate when the joint tenancy includes a spouse. Conversely, for joint tenancies with non-spousal individuals, the entire value is included in the estate minus any documented contributions by the surviving joint owner.

 Life Insurance Valuation

Life insurance valuation can be complex. If the decedent owned a policy on their own life, the value is the amount received by the beneficiary. The estate’s value includes the cost to purchase a comparable policy for policies owned by the decedent on another’s life.

 Valuing Securities

The valuation of stocks and bonds involves calculating the mean between the highest and lowest selling prices on the valuation date. Mutual funds are valued at the bid price or redemption value on the valuation date.

 Real Estate Valuation

Real estate requires a professional appraisal to establish value, as contested appraisals can increase estate tax burdens. Certified appraisers should be engaged to ensure accurate valuation, safeguarding against potential challenges from tax authorities.

These highlights touch on just a fraction of the potential assets an executor might manage. Incorrect asset valuation can attract scrutiny from auditors, possibly resulting in heightened tax obligations. Engaging a qualified estate planning attorney can provide essential guidance through the valuation process, assisting executors in navigating their comprehensive duties efficiently.From the desk of Attorney Brandon McGee, McGee Law Firm

Brandon McGee
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