When a loved one passes away, the process of settling their estate begins, which involves determining the value of each asset and the estate’s total value. This valuation is not only crucial for fair distribution among heirs but also for meeting legal requirements.
However, a common question arises: should the assets be valued based on their worth at the time of acquisition or at the time of the decedent’s death?
Which one matters?
In the process of valuing an estate for probate, the value of the estate’s assets at the time of the deceased’s death is what matters. Probate valuations help determine the market value of the estate’s assets as of the date of death.
This valuation is crucial in determining the amount of inheritance tax that the personal representative must pay, if applicable, and properly distributing assets according to the will or intestacy laws. This can also determine whether the estate is large enough to go through probate.
The acquisition value, or the price at which the deceased originally purchased the assets, is generally not relevant for the purposes of probate. The focus is on the fair market value at the time of death to ensure that all estate and tax calculations are based on the most current valuation.
The importance of the distinction
While the acquisition value of assets might provide historical context, it is the value at death that legally and practically influences the probate process. Understanding this principle helps executors and beneficiaries navigate the complexities of probate and estate administration with clarity and precision. Paired with experienced legal guidance, awareness of the process can help everyone involved make informed decisions.