A crucial step in the administration of someone’s estate after the individual passes away is determining the value of an estate.
After all, you cannot fairly divide and distribute the estate’s assets to your descendants if you do not know what the estate is worth.
Navigating the complexities of estate distribution and calculating the estate valuation of personal property, real estate, and other assets and liabilities belonging to the deceased is no easy task.
Whether you’re a careful planner looking to prepare your estate and loved ones for the future or just looking for some general information on determining the value of an estate in Texas, the estate planning and probate attorneys at Massingill are here to help. Use our guide to learn more.
If you have questions, please contact the Austin probate lawyers at Massingill today.
Common Reasons to Value Your Estate
Obtaining a valuation for your estate during your lifetime is an important step in estate planning. Below are some of the most common reasons for completing a valuation.
Tax Planning
One of the most notable reasons to value your estate is for tax planning. Your federal tax liability after your passing will depend on the value of your estate on the date of your death.
Estate taxes can significantly diminish your available wealth to pass on to your beneficiaries. By accurately valuing your estate during your lifetime and working with an experienced estate planning attorney, you can create a strategic plan to help minimize your tax liability for your estate and your heirs.
Legal Compliance
Having an accurate estate valuation is a legal requirement of the probate process in Texas.
Under the Texas Estates Code, as part of the estate administration process, the deceased’s personal representative must prepare and file with the court a full and detailed inventory of all estate property that the representative is aware of.
The personal representative must also note the appraisement of the fair market value of each item of property, either through their own assessment or with the assistance of an appraiser.
By keeping an updated estate valuation, you can help ensure that your personal representative is better equipped to comply with their legal obligations after your passing.
Simplifying and Reducing the Cost of the Probate Process
As a byproduct of helping your personal representative comply with their legal obligations, you can also reduce the time necessary to complete the probate process. This, in turn, can help to lower the overall cost of probate after you pass away.
Administering an estate after the passing of a loved one can be complicated. Be sure to take the steps you can to reduce time and stress on your personal representative throughout the process where possible.
Ascertaining Whether Small Estate Benefits Exist
Most people don’t believe the phrase “small estate” could be beneficial to them.
However, in Texas, a small estate can enable your estate to avoid the probate process entirely, allowing your property to be distributed through what’s called a small estate affidavit.
As a result, this can save you significant time and expenses. Texas defines a small estate as valued at $75,000 or less.
If you value your estate during your lifetime and know that the value of your estate is below the threshold, this can allow you to prepare your loved ones accordingly.
Notably, small estates can only avoid the probate process if the decedent dies without a will.
How Is the Value of an Estate Determined?
As they get started, one of the initial inquiries many people have is determining what is included in an estate value calculation.
While the process has many intricacies, the primary steps are (1) creating an inventory and valuation of any assets and (2) calculating and deducting any liabilities.
Inventory and Valuation of Assets
The first step is to create a detailed inventory of all assets you own. Common examples of assets that may be included in your estate include the following:
- Real estate (e.g., primary residence, rental properties, vacant land, etc.);
- Personal or collectible vehicles;
- Bank accounts;
- Stocks and bonds;
- Personal property items, such as jewelry, artwork, and family heirlooms;
- Retirement accounts;
- Life insurance policies; and
- Business ownership and interests.
After creating an inventory, your next step will be to assign a fair market value to each asset.
While valuing assets such as bank accounts and real estate can be relatively straightforward, placing a dollar value on family heirlooms and other items of sentimental value can sometimes prove difficult for loved ones.
If you have questions about how to appraise and value such items, we can consult with various experts to help assess the value of these and other specific assets.
Consideration of Liabilities
After you’ve created a complete inventory of your assets, your next step will be to take into consideration any liabilities. Common liabilities typically include:
- Mortgage loans;
- Credit card debts;
- Personal loans;
- Certain medical bills and related expenses;
- Expenses associated with estate administration,
- Funeral expenses, and
- Charitable gifts.
Once you’ve identified all liabilities of your estate, you will then subtract the total value of those liabilities from the total amount of your assets to determine your estate value.
Massingill: Your Trusted Texas Estate Planning and Probate Attorneys
Valuing your estate periodically can provide several benefits for your estate and your loved ones in the long run. That said, doing so is not always easy or intuitive. Fortunately, you don’t have to navigate the process alone.
If you have questions about assessing the value of your estate and how it can help you plan for your future, the Texas probate and estate administration attorneys at Massingill are here to help.
With years of experience and hundreds of positive reviews from our past clients, we are confident that we have the tools and resources to help you simplify the process and prepare you for what’s ahead.
Give us a call to discuss your needs and goals and see how Massingill can help you move forward today.
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Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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