Asset valuation can be an important -- but tricky -- part of any estate.
An asset is anything that has monetary value. In terms of an estate, you could be talking about a business, the rights to a collection of published works, art pieces, coin collections, undeveloped property or jewelry.
There are usually several problems that have to be considered when it comes to asset valuations and estate planning:
- How should the asset be valued at the time the estate plan is made?
- What happens if the value of one or more asset drastically changes between the time a will is made and the time its maker actually dies?
- Is there a way to divide an asset without destroying its value?
The reason the method of valuation is a problem is that there are several different modes that can be used to render a dollar value to any asset. It's important to choose the method that you think will give the truest value -- that way you have solid information to use when creating your estate plan and will.
The second problem is trickier. If you are aiming for a fair distribution of your wealth among your heirs, it could be a serious issue if a coin collection you have valued today takes off in value in the 20 years between when you write your will and when you die. You could accidentally end up leaving one heir with a much bigger inheritance than you do the others. This is something you absolutely want to discuss with your attorney so that you have a way of dealing with the issue built into your will.
The third problem can be tricky if the asset has more value as a group than it does divided up. For example, a parcel of undeveloped land might be worth a lot of money -- as long as it can be sold intact. If you divide it among your heirs, you may end up lowering the value of the land. In situations like that, it's sometimes better to have your will order the asset to be sold and the profits divided instead.
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