Accounting and Tax Issues in Probate - Part I, Valuing Assets
Valuing Home and Surface InterestsValuing a home or land can usually be done in one of two ways. The first is to rely on the fair market value reflected in the current tax assessor's statement. These values, at least in the larger counties, are updated by computer and are usually very close to the correct value. In some of the smaller counties, where the tax assessor does not regularly reassess the value of the property, this may not be acceptable to the IRS or the Oklahoma Tax Commission.
The second way to value buildings and land is to obtain a certified appraisal. Fees run in the $400 - $600 range for most areas in the state.
Valuing Mineral InterestsOil and gas interests are valued somewhat differently. If the interests are producing income, you can use an approved formula to arrive at fair market value. You calculate this value by adding the production for a twelve month period beginning six months before death and ending six months after death and multiplying the total by the proper identifier. For oil the multiplier is 4 and for gas it is 7.
If mineral interests are not leased or non-producing, you have two options. You can rely on the values established by the State by calling the Oklahoma Tax Commission and giving them the location information, but often this value will be high. If more accurate values are needed because of the size of the estate or the apportionment among beneficiaries, you may need to hire an approved appraiser to value the mineral interest. This is more expensive than a surface appraisal, and usually runs around $6,000-$9,000.
Valuing Business InterestsIf your clients own a business, a family limited partnership, a limited liability company or something similar, valuing it can also be fairly costly, especially if you are asking for "lack of control" or "lack of marketability" tax discounts. To obtain such an appraisal, the business records must be current and the appraiser will want to look at the governing instruments and several years of financial information. A cost of $6,500 to $10,000 is not unusual.
Valuing Life InsuranceIf the decedent owned life insurance, you will need to request a Form 712 from each life insurance company to establish the date of death value.
Valuing Financial AccountsFor financial accounts (banks, investment companies, mutual funds) I recommend you send the company a pre-printed form to be completed with the date of death value and the company's letterhead, stamp or other identifying information. Some companies are less responsive than others and simply ignore the request. If this occurs, you can use a financial statement covering the date of death and highlight the value for the date in question. This only works if the institution provides a daily balance on its statement. Otherwise, you may need to interpolate the value based on the number of days in the appropriate period.
Valuing StocksOne problem area involves individually held stocks. You will need to go to an appropriate source (Wall Street Journal, Morning Star) and make a printout of the value of each stock as of the date of death. You'll also need to provide written verification of the number of stocks owned as of that date.
Valuing Miscellaneous PropertyA problem area is collectibles (gold coins, stamps, antiques). Unless these are relatively insignificant in value, you will need an expert certified to appraise them.
Values of household furnishings and personal affects can usually be estimated and certified by the Personal Representative. If the items are being sold, then proof of the amount received is sufficient.
Titled assets, such as vehicles, farm tractors and the like can normally be valued by going to the National Automobile Dealers Association (NADA) website. You will need to know the year, make, model, mileage, and accessories to obtain an accurate evaluation.
If the decedent left an annuity payable to a beneficiary, you will need to obtain a statement of value from the company issuing the annuity. The same holds true for IRAs or retirement accounts.
If you encounter an asset other than those listed above and are having a problem arriving at its present value, call the Oklahoma Tax Commission Auditor for help.