Less than 20 years ago, the federal government would apply an estate tax equal to 55% of that amount of the decedent’s estate net value exceeding $675,000. As a result, it was commonly required that executors procure personal property appraisals of the decedent’s estate to calculate the amount of estate tax due. Over the years, federal government increased the amount of the federal estate tax exemption, which reached $5.49 million 2017. However, when Congress enacted the Tax Cuts and Jobs Act of 2017, it more than doubled the amount of the estate tax exemption for persons dying after December 31, 2017. Today, no federal estate tax is due unless the decedent dies with a net estate valued at more than $11.2 million. Because only 0.2% of tax payors possess that much net wealth, relatively few executors will be legally required to procure personal property appraisals.
At this point, you’re probably saying to yourself, There’s no reason for me to get a personal property appraisal since my estate won’t be worth near $11.2 million. WRONG!
Personal property appraisals are indispensable for keeping the peace among your loved ones after you pass. Suppose that you, like the vast majority of us, are not going to die with an estate exceeding $11,200,000. However, that’s not to say that you don’t own a few treasures to give away. Suppose you’re most proud of three: (1) an Eighteenth-Century Pembroke Renoth mahogany tall clock, (2) a string of your grandmother’s natural black South Sea pearls and (3) a two-hundred-year-old landscape oil painting from the Hudson River School. To you, they’re all equally special, as are your children, Linda, Fred and John. In your last will and testament, you have planned to bequeath the clock to John, the pearls to Linda and the painting to Fred. Your will also provides that the residue of your estate is to be shared equally among all three children. So, you can die in peace, right?
Wait. Just think what happens when Linda discovers that the painting that you gave Fred is worth $250,000 and that her necklace is worth only $65,000. Then again, consider just how John will react when he discovers that your bequest—the antique tall clock—is worth one-tenth of what you gave his brother! Let’s be honest. As much as you might wish that your children will take the high road and not fight over your belongings, it would be hard for most people in John’s position not to feel deeply wounded.
Arcadia Appraisals is here to keep harmony in your family after you’ve gone. If the people to whom you plan to bequeath gifts are also takers as residuary beneficiaries under your will, then you should treat those specific bequests as part of the kitty to be divided upon your passing. You can do this by having the three gifts appraised. If Fred wants the painting, then its $250,000 value should be deducted from his cash bequest. Similarly, if John wants the grandfather clock, his cash bequest will correspondingly increase because his gift has a value of only $25,000. In the end, all siblings are treated fairly, but more importantly, you can rest easy knowing that you’ve been fair and impartial to the end.
Appraisals are just plain necessary, and they won’t break you. They’re indispensable to keeping the peace. Call us. We at Arcadia Appraisals can help.