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How is an Estate Valued in Estate Planning?

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“How is an Estate Valued in Estate Planning?” by Attorney Laura Curry

What makes up your estate? One of the first steps when I sit down with an estate planning client is to compile a list of all of their assets. Oftentimes, clients are surprised to find out how much is actually included in their estate. Once you have an inventory of your assets, it’s time to start planning what happens to those assets when you pass away. 

Your estate will include the more typical assets that come to the front of your mind such as your cash accounts, house, and car. However, let’s not forget about your retirement account, proceeds from your life insurance policy, business ownership interests, and personal property. These assets you may not be thinking about daily must still be accounted for. 

So how is the value of your estate determined? There are generally 4 types of valuations of an asset that are important for estate planning and administration.

  1. Value at Death. The fair market value is used to determine the value of the asset at the time of a decedent’s death. If you have a large estate and possibly owe federal estate tax, you may be able to use an alternate valuation date. It’s important to consult with your estate administration attorney to determine what’s best for your particular situation.
  2. Value at Disposition. This refers to the asset’s value at the time of sale or distribution. This valuation is important to calculate any estate income tax if assets are sold. It’s also used to calculate an inheritance tax if the beneficiary is not exempt under Maryland law. 
  3. Probate Value. If your assets are going through probate, meaning you die with an asset in your individual name without a beneficiary, then the court will require that the assets and value be disclosed through the court probate process.
  4. Gross Versus Net Value. The gross value of your estate is the sum of all asset values. It does not factor any liability against the asset. This is generally used in calculating taxes and how executor compensation is determined in Maryland. The net value is the gross value minus any debt or liabilities. This is also used in calculating certain taxes. 

You can see how your assets and the value of those assets will impact your estate. It is critical to have a well-designed estate plan so you can preserve the value of your assets, reduce unnecessary taxes or expenses, and ensure your heirs will receive what you intend. Please contact us at Sinclair Prosser Gasior today to start your estate plan and schedule your personal consultation. 

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