Suppose you want your children to inherit your prized jewelry collection. How do you value items for estate planning? Family members may have wildly divergent opinions of the fair market value of collectible assets that may lead to delays in your estate’s settlement and ultimately lead to litigation.
To avoid such bleak outcomes, obtain appraisals for all your valuable collectibles while you’re still living.
Although that brooch from your great-grandmother has high sentimental value, it may have fallen out of style, diminishing its financial worth. Determining its value examines today’s gemstone and precious metal prices, the quality of the artistry, and the manufacturer or designer. That way there will be no doubt about the value of an item someone is to inherit in your estate plan.
You’ll want a professional appraisal to determine the value of your items.
Several industry groups require their members to meet qualifications and adhere to a code of ethics. For jewelry, there’s the Accredited Gemologists Association and the American Gem Society. In general, there’s the American Society of Appraisers and the Appraisers Association of America. Hiring an accredited appraiser means that the appraiser has had training to be knowledgeable about the current market value of your asset.
An appraisal costs anywhere from $50 to $150 per item. High-end auction houses like Sotheby’s offer free appraisal estimates — just send a photograph along with any other information about the asset.
You also can search the Better Business Bureau to find a reputable appraiser. Given that the prices of precious metals can fluctuate dramatically, jewelry appraisals should be carried out every few years. Knowing the value of a piece will help you obtain a fair appraisal and give you insight when planning your estate.
Know the tax rules
The IRS defines a “collectible” as a work of art, a rug, an antique, any metal or gem, any stamp or coin, valuable alcoholic beverages, or any other tangible personal property under Internal Revenue Code Section 408(m).
If your estate holds collectibles valued at $3,000 or more, an appraisal must be filed with the estate return.
This must be accompanied by a statement made by the executor, under penalties of perjury, that the list of collectibles is complete and the appraiser is qualified.
The IRS offers a procedure to request a Statement of Value to assist in substantiating the value of works of art appraised at $50,000 or more, including paintings, sculptures, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts, and historical memorabilia.
Even if a Statement of Value isn’t required, you must attach it to the estate tax return if you have it. This applies even if you don’t agree with the IRS’s determination.
Get estimates, valuations, and amounts from multiple sources, because markets and the economy can influence an item’s value.
Your executor and heirs will want to have a reasonable range of values if they decide to sell the assets in order to calculate the value of the estate. It also may speed up the whole estate process because your executor and heirs won’t have to find the right experts. Even if your heirs decide to hold the assets and not sell them, they’ll need to know the collectibles’ value to establish the total value of your estate.
This is just a summary of what can be a complex process if the value of collectibles is substantial. The IRS rules can be especially technical, so work closely with appraisers, tax, and financial professionals. To avoid unnecessary disputes, consider hiring a professional appraiser to determine the value of items in your estate plan.
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