Issues Regarding Valuation of Cash and Non-Cash Assets in Estate Planning

Oct 24, 2017
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Valuation of Cash or Financial Assets

Valuation of Cash or Financial Assets is determined by providing an independent statement such as from a Bank, Brokerage, Insurance Company or other financial institution.

Valuation of Tangible Personal Property

In general, if the value of any item of Tangible Personal Property exceeds $5,000 then, a value must be established by reliable written records.

Reliable written records: The reliability of written records is to be determined on the basis of all of the facts and circumstances of a particular case, including the contemporaneous nature of the writing evidencing the contribution.

  • Contents of reliable written records. Reliable written records must include—
    1. The information required by paragraph (a)(1) of this section;
    2. The fair market value of the property on the date the contribution was made;
    3. The method used in determining the fair market value; and
    4. In the case of a contribution of clothing or a household item as defined in §1.170A-18(c), the condition of the item.
  • Additional substantiation rules may apply.

Valuation of Real Property or Growing Business Concerns

Valuations of Real Property or Growing Business Concerns must be established by a Qualified Appraisal prepared by a Qualified Appraiser.

Qualified Appraisal

Qualified appraisal (1) Definition.: For purposes of section 170(f)(11) and §§1.170A-16(d)(1)(ii) and 1.170A-16(e)(1)(ii), the term qualified appraisal means an appraisal document that is prepared by a qualified appraiser (as defined in paragraph (b)(1) of this section) in accordance with generally accepted appraisal standards (as defined in paragraph (a)(2) of this section) and otherwise complies with the requirements of this paragraph (a).

(2) Generally accepted appraisal standards defined. For purposes of paragraph (a)(1) of this section, generally accepted appraisal standards means the substance and principles of the Uniform Standards of Professional Appraisal Practice, as developed by the Appraisal Standards Board of the Appraisal Foundation.

Qualified Appraiser

Section 1.170A-17(b) of the proposed regulations states… B. Qualified appraiser

A “qualified appraiser” must be an individual with verifiable education and experience in valuing the relevant type of property for which the appraisal is performed.

The regulations provide that an individual has verifiable education and experience if the individual has successfully completed professional or college-level coursework in valuing the relevant type of property and has two or more years’ experience in valuing that type of property.

Section 3.03(3)(a)(ii) of Notice 2006-96 provides that, for real estate appraisers, education and experience are sufficient if the appraiser holds a license or certificate to value the relevant type of property in the state in which the property is located.


Valuations of assets in connection with Estate Planning are usually required in the following circumstances:

  • Death of an individual owning property or other assets
  • Used in the evaluation of the “Step-Up” in basis
  • Used to determine Estate Tax Valuations
  • Used to determine Estate values at the death of an owner or owner’s spouse, or the Settlor or Joint Settlor in connection with administration and/or settling a Living Trust or other types of Trusts
  • Used to determine the value of lifetime gifts to individuals or charities
  • Used to apply applicable discounts for leveraged gifting strategies

Pitfalls of using valuation methods other than Qualified Appraisals in connection with Real Property or Growing Business Concerns.

In order to try and avoid the cost of obtaining a qualified appraisal, some people will seek usage of an alternate method to value assets while seeking to obtain certain tax advantages.  Such methods may include online valuations, such as or a Competitive Market Analysis prepared by a licensed real estate agent or Broker.

The IRS does not typically recognize or accept these types of valuations and if you are seeking some sort of tax advantage such as reducing or avoiding estate taxes or establishing fair market value for Step-Up in basis purposes, it is the IRS who must be satisfied.  The IRS requires very specific criteria in valuing such assets and highly unreliable online services such as and licensed Real Estate Agents and Brokers who are not licensed Appraisers, do not meet the requirements established by the Service.

Other potential problems with alternate valuations.

 Distributing assets in connection with the settlement of a Living Trust:

Since a Living Trust does not involve Probate, there is no automatic appraisal conducted.  What if a piece of real property is to be distributed to a beneficiary as part of their overall inherited share?  A flawed online or realtor prepared valuation could detrimentally effect one or more beneficiaries, and could result in bickering, infighting and even costly litigation.

Administrative divisions of Living Trust assets at the death of the first spouse:

In some cases a Living Trust may require the administrative division of Trust assets into two separate shares, often known as Survivor’s Share/Survivor’s Trust and Decedent’s Share/Decedent’s Trust.   Perhaps the Surviving Spouse will amend their Trust share along the way to provide beneficial shares to different beneficiaries and or different percentages than those named under the Deceased Spouse’s share.   Years could pass before the Surviving Spouse dies, and one or more of the resulting heirs could seek to challenge the values used back at the first death as being wrong or fraudulently manipulated.  If a qualified appraisal was prepared at the time of death, no such challenge could be made.

For More Information Contact AmeriEstate Legal Plan, Inc. or Call 800-235-0963