One of the big issues that comes up in estate planning is tax planning. Minimizing tax liability and preserving assets for the next generation is an important goal that many Pennsylvania families take into account when creating a plan. Tax planning means taking deductions at the right time, transferring assets carefully, and having a good idea of the total value of the estate or a prediction of its likely value in the future. Valuing assets is harder than it sounds, especially when it comes to unique items like art, family heirlooms, or real estate, which have fluctuating values based on market conditions.
Appraising unique assets like works of art or antiques is an imprecise practice and is often more of an art than a science. The truth is that for any asset besides cash or a stock on a given day, a valuation is only as good as what someone will actually pay for it on the day that it is sold. As a result, assets that are never sold can be hard to value with any degree of certainty.
One case where this shows in a rather extreme way is in the estate of the late pop star Michael Jackson. At the time that he passed away his estate was in serious debt and struggling financially. However, after he died his assets gained value and his catalog of music and movies began to sell at a much higher rate. That growth could not have been accurately predicted before or at the time of his passing and as a result the estate is now engaged in negotiations with the IRS about the “true” value of these artistic assets for tax purposes.
Source: New York Times, "Putting an Estate Value on the Assets Unique to You," Paul Sullivan, Sept. 27, 2013.