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The Role of Appraisals in the Inventory Process
Settling a loved one's estate after their passing can be an overwhelming process. In Kentucky, the first step involves filing a petition to do one of three things: (1) probate the will; (2) appoint an administrator/administratrix (if no Will exists); or, (3) appoint an executor/executrix (if a Will does exist). Within the same form, the petitioner must also include fair market value estimates of the decedent's real and personal property.
After an appointment has been made, the administrator/ix or executor/ix (hereinafter referred to as "personal representative" for the purpose of this article) will have sixty (60) days to complete a full inventory of the estate. When conducting an inventory, many struggle with placing an appropriate value on estate items. Some things such as bank accounts, life insurance policies and retirement accounts have an easily identified face-value. Automobiles or residential property can also be relatively easy to place a value on by comparing them to similar property. But how does one value Aunt Ruth's collection of pearl necklaces? How about Grandpa's treasured paintings? How about Dad's business interest in the company he started or his commercial building? Some items such as these can be hard to assign a monetary value, especially if the personal representative attaches sentimental value to them.
While not every estate requires an appraiser's services, a professional appraiser can play an important role in determining the fair market value of unique items or specific interests. Not only will an appraisal be helpful in detailing a court-required inventory, it may also be necessary for state or federal estate tax returns or for disposing of the property. In addition, the appraisal can help the personal representative gauge whether the decedent's insurance coverage for the assets is sufficient. If dispersal of assets is not specified in a Will, appraisals can assure a personal representative that assets are dispersed in a fair manner.
Keep in mind that most costs associated with the administration of an estate can be paid from the estate - this includes appraisals. It is important for a personal representative to keep receipts of an appraiser's services and a signed explanation of any appraisals that are conducted.
If you have been appointed or named to administer an estate, consider contacting an estate planning attorney to help you with your fiduciary duties. Consultation with an attorney can be invaluable and, if you choose to retain one, fees can generally be paid out of the estate.