Probate Estates and Professional Appraisal
Handling legal and financial matters after a death is never an easy situation. Families and friends are dealing with grief that is compounded by the stress of needing to figure out how to move forward and pressure to get affairs in order in a timely manner. Funeral and memorial service arrangements need to be coordinated between family and friends, the space and time to grieve and process can be complicated by employment that may not allow for much flexibility, and depending on the relationship to the deceased, handling the last will and testament and managing the estate can add an additional layer of stress. Furthermore, in some states and under certain conditions all or part of the estate may be subject to probate, stretching out the process of getting final affairs in order and final will executed by months or even longer.
What is Probate?
The idea of a last will and testament is not foreign to many, but probate is a term and process that is less common. Probate refers to the legal process that is necessary for the assets included in the estate of a deceased person to be distributed to the inheritors. In essence, probate is the process of verifying the contents of the last will and testament are genuine and complete, or in the case that there is no will that the assets of the estate are accounted for and distributed properly. The laws surrounding when the probate process is necessary varies from state to state. Most states have adopted the UPC, or Uniform Probate Code, that simplifies the administration of a probate estate, but this code has not been adopted by all states and even within the states that have there are differences in the process.
To exemplify the differences in the probate estate administration process from state to state, we can simply look at the requirements across a few different states. In Texas, probate can be avoided if the value of an estate is under $75,000, but only personal property is included in this calculation. In California, probate is necessary when the value of an estate is more than twice as much, $166,250 to be exact, but this includes both the personal and real property. Because one includes homestead and real property, this makes it far more likely that the probate process will be applicable to an estate in California if the estate is that of someone who owned a home or other real estate at their time of death. In Ohio, probate is not necessary if the total value of the estate is $35,000 or less or the value of the estate is under $100,000 and the entire estate is to be transferred to a surviving spouse. Ohio does not include in the value of the estate any jointly owned property, however, so the actual value of the estate can be much higher than the cap amounts depending on legal ownership of its contents. Finally, Georgia does not require an estate to go through the probate process if there is no will, there are no debts owed, and there is no dispute amongst the heirs to said estate regarding how assets are to be distributed.
US Asset Appraisals operates in the six-state area of the upper midwest of Minnesota, Wisconsin, North Dakota, South Dakota, Iowa, and Illinois, with the majority of our business taking place in our home state of Minnesota. Probate in Minnesota is triggered when a person passes away with an estate over a value of $75,000, much like in Texas, but like in California includes real property, however only if, like in Ohio, that real property was owned entirely by the descendent. If property is owned across state lines, however, that property will be subject to the laws where it was owned. All of this should be enough to say that just the process for determining what is and is not subject to probate is a complicated topic, and the process is similarly involved
What is the probate estate process?
Because the probate process that estates are subject to can change so much, as we have seen above with the qualifications, we will focus on how the process works in Minnesota in general terms:
Probate is initiated through filing the appropriate paperwork, typically by the executor of the will if one exists, in the court of the county where the deceased resided at the time of their passing. This must take place within three years of the decedent’s death.
A personal representative (or representatives in some cases) is named by the court to administer the estate, often as decreed by the will, provided one exists.
The personal representative is then responsible for collecting, creating an inventory of, and valuing all assets that comprise the estate.
Once the estate has been valuable, the personal representative files the list of assets in the estate with the probate court.
Once the inventory is accepted by the court as accurate and complete, the probate process will go forward and the estate will be used to pay outstanding debts, file final taxes, and finally be distributed to those set to inherit the remainder of the proceeds of the estate.
USAA’s Role in Probate Estates
At US Asset Appraisals we have a team with experience in one of the most crucial aspects of the probate estate process: appraisal. Determining the value of some parts of an estate can be quite simple. A bank account, for instance, is relatively simple to value. An investment account, especially in the current age of digitization, presents a slightly more complicated situation, but similarly is measured in a dollar value at the end of the day. A critical piece that can complicate even some of the more straightforward assets is that in the case of probate estates is that they must be valued at the date of death of the decedent rather than the date when they are being appraised or valued.
A Date of Death (DOD) Appraisal or valuation establishes the Fair Market Value (FMV) of assets at a specific date in the past. Going back to bank and investment accounts, speaking with the bank or investment firm should make it a relatively simple task to get an exact value of either type of account on any given date. Real and personal property, however, operate with entirely different market dynamics. The value of real estate even three to six months in the past is not as simple as calling up a real estate agent and asking. Personal property, equipment, machinery, collectibles, and the like are even more difficult in this respect as they are rarely, if ever, professionally appraised and valued throughout their periods of ownership. This is why thorough and knowledgeable appraisers are invaluable in the administration of a probate estate.
As a useful example, consider an automobile in the current market as impacted by supply chain issues due to the COVID-19 pandemic. If someone were to have passed away in the early days of 2020 and their estate included an automobile of no special collectible value, the price from that asset from February of 2020 to July of 2020 can be expected to have changed dramatically in that short period of time. It would be comparatively simple to quickly look up sales of comparable vehicles in July or check listings to find comparable vehicles for sale to arrive at a FMV for July, but the value would certainly be inflated versus what it would have been in February which is what is of concern with a DOD Appraisal. Similar logic could be applied to real estate values with the current rising interest rates or the market for collectibles which can always be volatile.
Why does this matter in the case of a probate estate? The answer is two-fold. As discussed above, there are value limits that dictate whether an estate must go through the probate process, and similarly those values can determine how the estate can be handled. The second concern is related to taxes. If the assets of the estate are overvalued, this will later lead to unnecessary overtaxation. On the other hand, if the assets of the estate are valued too low it can leave the personal representative that was determined by the probate court to administer the estate with avoidable tax penalties. In either case, an inaccurate or careless valuation through a poor DOD appraisal could lead to disputes between the inheriting parties.
The benefit of using US Asset Appraisals in a probate estate appraisal scenario is that not only does our team understand the process through experience working in this exact situation, but we consistently appraise assets of all different classes. This means we have an extensive backlog of values across time for an enormous variety of different items that could come up in a probate estate, historical knowledge of specific markets, and a network of experts and associates at our disposal if an item comes up that we need assistance with. If you find yourself in need of a trusted vendor of appraisals for probate estates, we are at your disposal to provide a quote and explain to you plainly how the process will go. We encourage you to contact us at any time, but especially in these fragile scenarios.
