In probate proceedings, the decedent’s assets can be lumped into two categories: real property and personal property. Real property includes any type of real estate, such as a house, condo, or land.
Personal property generally refers to any other type of property that a person or estate may own. Personal property can include tangible assets like vehicles, art, jewelry, and collectibles, and it can include intangible assets like bank accounts, brokerage accounts, and retirement plans.
The Best Methods to Value Personal Property
There’s no one-size-fits-all solution when it comes to valuing personal property for probate. The best valuation method will depend on the type of asset you’re dealing with, and it may hinge on whether or not another interested party to the estate is disputing the valuations. When there aren’t any objections or disputes and the probate process is informal, then well-informed approximations will usually suffice. If, however, there is a dispute and the probate process is formal and/or supervised, you’ll probably need to have the disputed assets professionally appraised.
Antiques are notoriously difficult to value. By definition, antiques are old and unique, so it’s often difficult to find comparable items for valuation purposes. You’ll probably need to have antiques appraised by a qualified antiques dealer or professional appraiser.
If the art piece is from a distinguishable artist, you should be able to find comparable pieces from the artists on auctions and Classifieds listings. For rare art pieces, you’ll probably need to have the piece appraised by a professional. Note that if you’re auctioning off the art, most auction houses will include the appraisal cost in their cut of the proceeds so there’s no out-of-pocket cost to you.
If the business was recently purchased, you may be able to use the purchase price. Otherwise, look for any value listed in an agreement between the business partners, or hire a professional business appraiser to value the business (usually an accountant, consultant, or investment banker). If the business won’t continue after the decedent’s death, you can determine the value based on the value of the business’s assets instead.
You may be able to find comparable items on the open market in Classifieds ads or auctions, but the value of collectibles will usually hinge on the condition of the items, and whether or not the items come in a full set. If the value of the collectibles is low to moderate, using comparable prices should suffice; if the collectibles are rare and extremely valuable, you’ll probably need to visit a professional appraiser that specializes in that field of collectibles.
Individually-owned bank accounts, brokerage accounts, and retirement accounts are the easiest assets to value. The court will want to see the value of the account at the date of death, including any interest earned through that date. Financial accounts that have a designated beneficiary or a joint owner with rights of survivorship aren’t subject to probate, so it’s unnecessary to value such accounts for probate.
Most firearms can be valued based on comparable firearms for sale in Classifieds ads and auctions. Rare or limited-edition firearms will likely require a professional appraisal from a gun broker.
Most people value all of the household furnishings as a group unless one or more items are especially valuable (e.g. a grand piano). Keep in mind that the fair market value is based on what a buyer would pay for the items today, not what the original owner paid or the cost to replace the items.
Copyrights, trademarks, and patents will need to be professionally appraised to determine the fair market value. Websites, blogs, and web domain names can be valued based on ad revenue, Alexa rank, and Google rank.
Valuable jewelry with precious metals and rare stones can easily be appraised at a local jewelry store. For decorative jewelry, it’s fine to approximate a value for a group of items. Note that pawn shops and gold brokers will appraise jewelry, but they often offer a lower price than what you may get from a jewelry store.
Life Insurance Policies
Life insurance policies only need to be valued for probate if the policy lists the decedent or the estate as the designated beneficiary (which rarely happens). If that’s the case, then the fair market value is equal to the death benefit. Term life insurance policies usually have a fixed death benefit, while permanent life insurance policies (whole life, universal life, etc.) may have a variable death benefit based on the policy’s cash value.
If the pension plan offers a death benefit, the financial institution should be able to furnish the value for you. If there’s no death benefit, then the value is $0.
This is a general category on the probate inventory form that can include anything that doesn’t fit neatly into another asset category. Sentimental items that don’t have intrinsic value can be valued at $0. In most cases, personal items are issued an approximate value as a group.
To determine the value of a car, boat, trailer, RV, or ATV, start by using an online service like Kelley Blue Book or Edmunds. If you’re unable to get an estimate from an online service, you can search the Classifieds section of a newspaper or Craigslist for comparable vehicles, or you can check auction records. You can also take the vehicle directly to a dealer for a quote, but don’t forget that dealers typically offer to pay less than what you could get from selling to a private buyer.
As you’re working to determine the fair market value of an estate’s assets for probate, keep in mind that not all assets are subject to probate. In fact, most (if not all) assets can be positioned in advance to bypass probate with proper estate planning. If the estate includes any non-probate assets, you don’t need to worry about valuing the asset—all you need to do is initiate the transfer of the asset to the designated beneficiary by submitting a copy of the decedent’s death certificate to the financial custodian, along with any required paperwork that the custodian requires.
The following assets are considered “non-probate” assets:
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Retirement accounts (IRA, 401k, etc.) with a third-party beneficiary
- Life insurance policies with a third-party beneficiary
- Real estate owned in joint tenancy or as tenants in the entirety
- Living trusts
Personal property that’s properly transferred to a living trust is removed from the decedent’s estate and does not need to be valued for probate. Depending on the terms of the trust agreement, the trustee will either continue to administer the assets in trust for the benefit of the beneficiary, or the trustee will transfer all of the assets to the beneficiary.
Do You Need Help with Probate Matters?
As you can see, AZ probate laws can be complex. It requires a number of steps and without the right approach, it’s easy to get lost in the details.
At JacksonWhite, we can make probate a clear, easy-to-understand process. If you’d like help with probate matters, call the talented team at JacksonWhite Law today.
We can help explain your legal options and direct you to the probate solution that works for you and your loved ones.