Estate and trusts

In estate planning, you often come across the term “fair market value.” However, some assets are easier to value than others.

The IRS defines fair market value as “the value at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

Some assets are easily valued. A stock, for example, that is listed on a major exchange can be valued simply by averaging the highest and lowest quoted selling price for that day. That price, multiplied by the number of shares you own, gives you the value of your stock on that day. Establishing value on most other property is not quite as easy, though. Let’s look at other forms of property and how they might be valued for estate tax purposes.

• Real property. There are numerous factors that have to be considered, such as the size, shape, and location of the property, zoning restrictions, its potential use, and the value of surrounding property. The value of the buildings depends on whether they are rental properties, the present cost of reproducing them, and their loss of value because of depreciation. Also, certain properties, such as farm or business property, have special valuation issues that must be considered for estate tax purposes.
• Personal property. Property such as your car, furniture, jewelry, etc., will be valued according to the definition mentioned above. If you have a house full of possessions, each object will be valued separately. Professional appraisals may be necessary for items such as collectibles or one-of-a-kind possessions.
• Life insurance. Whether or not life insurance will be included in your estate depends on a number of factors. Do you own the policy or policies? Did you hold any incidents of ownership at the time of your death or did you transfer the ownership or incidents of ownership within three years of your death? Also, any insurance proceeds payable to your estate will be included in your estate for estate tax purposes. The value of the insurance is generally the lump-sum amount of the insurance proceeds.
• Stock of closely held corporations. A professional appraisal is usually required. This stock is not often traded and, as a result, is difficult to value. Factors in valuation include: the nature and history of the business, its financial condition, its future outlook, its goodwill, and the market price of the stock of corporations in a similar business.
• Professional practice. This is more difficult to value than other types of businesses because so much is dependent on the professional’s expertise. If, for example, a dentist dies, his or her family can’t simply take over the practice unless a family member happens to be a licensed dentist. The valuation will depend to a great degree on the practice’s client base, fee structure, competition, source of payments, strength of staff, location, and assets.

Regularly putting a value on your estate is a good idea because it allows you to plan for the payment of bequests, debts, and estate taxes. But it is only one step in the estate planning process. Your legal, tax, and financial professionals can help you understand the steps you need to take.

As the vibrant colors of autumn paint the landscape, the fall season invites us to reflect on the changes in nature and consider the changes we can make in our own lives. Estate planning, often overlooked, is a vital aspect of ensuring a secure future for your loved ones. Just as leaves fall and transition, estate planning in the fall season presents an opportunity to make necessary arrangements. In this article, we’ll explore why fall is an ideal time for estate planning and offer valuable tips to help you navigate this important process.

Why Fall is an Ideal Time for Estate Planning

Fall serves as a natural reminder of life’s cyclical nature and the inevitability of change. It’s also a time when many people evaluate their financial goals and commitments. Estate planning in the fall offers several benefits:

1. Reflection: As the year winds down, fall encourages introspection. It’s a moment to consider your assets, family dynamics, and wishes for the future.
2. Time for Adjustments: Fall marks the last quarter of the year, giving you a chance to adjust your financial plans and goals to align with your vision for your family’s future.
3. Preparation for the Year’s End: Estate planning in the fall allows you to make the most of available tax advantages before the end of the tax year.
4. Holiday Gatherings: Fall and the upcoming holiday season often mean gatherings with family and friends. It’s an apt time to discuss your estate planning intentions and ensure everyone is on the same page.

Estate Planning Tips for Fall

1. Review Your Will and Trust: If you have a will or trust, review them to ensure they accurately reflect your current wishes. Life changes, such as marriages, births, or deaths, might necessitate updates.
2. Appoint Guardians: If you have minor children, fall is a time to review and update guardianship designations in case of unforeseen events.
3. Beneficiary Designations: Review beneficiary designations on retirement accounts, life insurance policies, and other assets to ensure they’re up to date.
4. Healthcare Directives: Fall is a time to review and potentially update healthcare directives, living wills, and powers of attorney, outlining your preferences for medical care and appointing decision-makers if needed.
5. Charitable Giving: As the holiday season approaches, consider charitable giving strategies. Estate planning can incorporate charitable donations, potentially providing tax benefits while supporting causes you care about.
6. Evaluate Your Estate Tax Situation: If your estate is substantial, consult with financial professionals to assess your potential estate tax liability and explore strategies to minimize it.
7. Organize Important Documents: Compile and organize all important documents, including financial records, insurance policies, legal documents, and account information. This will make it easier for your loved ones to navigate your affairs in case of emergencies.
8. Discuss Your Plans: Use holiday gatherings or family meetings to openly discuss your estate planning intentions with your loved ones. Clear communication can prevent misunderstandings and conflicts down the road.

As leaves fall and nature undergoes change, estate planning in the fall serves as a timely reminder to prepare for the inevitable changes in our lives. By taking the time to review and update your estate plans, you’re ensuring that your loved ones will be cared for according to your wishes. The fall season offers a unique opportunity for reflection, planning, and action. Embrace the spirit of change and ensure a secure future for yourself and your family through thoughtful estate planning.