How do you Value Items in a House for Probate?

How Do You Value Items in a House for Probate?

Probate is a legal process where a decedent's estate is disposed of under the supervision of the court. The process is a complex one requiring several stages and complex legal rules. Often, the biggest asset a decedent leaves behind is his or her home and everything in it. 

A personal representative will have to be valuing the items in the property. It is an important step in the probate process and it is one that is usually done early in the process. It needs to be done even if the beneficiaries have no intention of selling anything in the house. 

Why do you need to value the items in a house for probate?

Apart from being an important step in the probate process, valuing the items in a house helps you calculate whether the estate of the decedent qualifies to pay Inheritance Tax and if so, how much.  A personal representative must also include insurance policies and personal property when determining the fair market value of the estate.

The rate of the estate tax in New York ranges from 3.06% to 16%, and estates that exceed a value of $5.25 million are subject to this tax. Also, the tax must be paid within nine months of the decedent's death.  If a decedent has a surviving spouse than that surviving spouse will probably receive all the financial assets. 

Other than the New York estate tax return, an estate may also qualify for federal estate tax. Estates that are worth more than $11.4 million between gross assets and prior taxable gifts may be liable to federal estate tax. This tax must also be paid within nine months of the decedent's passing. 

When valuing the house and its contents, ensure that the value placed on the contents of the house, and indeed the house itself, is reflective of their open market value (OMV) at the time of the decedent's death.

The process of valuing the contents of a property is not an easy one as it falls on the personal representative to ensure that nothing is overlooked. There are however guidelines that you can follow to help you in the process.

What do you need to know when valuing the items in a property for probate?

Property of a deceased person is divided into two types of property personal property and real estate. Real estate covers property like land and houses while personal property covers everything else. Items like cars, jewelry, art, memorabilia, furniture, cash, insurance policies, investments, and family heirlooms.  Everything must be given a fair market value by the personal representative.  If the deceased person had an estate plan the estate plan can assist the personal representative as they move the estate through probate court and distribute the financial assets of the deceased person.

Once you have established the date of death values for the items in the house, file them with the probate court within thirty to ninety days of beginning the probate process. A decedent can have two categories of assets: probate assets and non-probate assets. Probate assets are assets that belonged solely to the decedent at the time of death. New York is not a community property state; thus, the decedent's assets are not automatically passed on to his or her spouse. This class of assets is those for which you need to establish the date of death values.

When an estate qualifies for tax either at the state or federal level or both, you need to establish the date of death values for the non-probate assets too. Assets that qualify as non-probate assets are:

• Tenants by the entirety
• Joint tenants with right of survivorship
• Payable-on-death accounts
• transfer-on-death accounts
• Life insurance
• Retirement accounts including IRAs and 401(k)s
• Annuities 

How do you value the items in the property for probate?

Valuing assets like money in bank accounts or life insurance policies or stocks or shares are quite straightforward. However, valuing the contents of the homestead at its open market value is not as straightforward. You might want to consider getting the help of a professional. 

The open market value is the price the item might have reasonably fetched if it was sold on the open market to a buyer who was under no pressure. It is quite different from the replacement value or the insurance value.

You can value the items with the help of an estate agent in an informal valuation or you can choose to hire a professional surveyor in a formal valuation process.

Informal valuations can be offered for free by some estate agents. Some others will charge a low fee. If you want to use this option, consider getting valuations from at least three agents and make your valuation a mean of the three. Informal valuations are advisable when the estate you are valuing does not hit the threshold for estate tax.

Formal valuations are advisable when the estate in question exceeds $5.25 million in value. Formal valuations are expensive when compared with informal valuations and they are more detailed. 

What items in a homestead need valuing for probate?

As an estate administrator, one of your primary and initial duties is to locate all the assets the decedents owned and create an inventory of them. Some items may not be at the residence of the decedent: they may be saved in a bank or kept in the care of a friend or relative. The items can include: 

• Vehicles
• Art
• Silverware
• China
• Glass
• Jewelry
• Electrical goods
• Clothing
• Collections such as coins, wine, stamps, etc.
• Personalized number plates

For items whose value you can estimate using publicly available data, you do not need to get professional valuation whether formal or informal. For example, you can get an idea of the value of the vehicles by visiting websites where used cars are sold.

When getting values from professionals, consider asking for both the selling price and the asking price as sometimes, estate agents give values that they do not really think the property will sell for. This is especially the case when dealing with antiques as they are notoriously difficult to value.

For formal valuations, consider asking the valuer to give you a valuation for insurance purposes. With this, you can check whether the existing insurance cover over the property in question is adequate.

How long can it take to value the items in a house for probate?

Getting open market valuations for items can take anywhere from four to six weeks. This is especially the case if you are going the informal valuation route. If you are opting for formal valuations, it may take longer to get the values because formal valuations are more detailed. 

Get expert help. Speak to an estate attorney today

The potential complications of the process of valuing items for probate make it necessary to be careful when carrying out these duties. It is relatively easy to undervalue an item and sell it for less than it is worth. This can give rise to conflict between you as the estate administrator and the beneficiaries, or may give rise to misconduct proceedings before the court. Accusations of fraud may begin to fly around with lawsuits becoming the order of the day. Avoid these potential complications by contacting an experienced New York estate attorney early in the process. Contact Attorney Jimmy Wagner at 929-477-8889 for help or reach out to us through our contact page.