​       Appraisals performed to assess the value of the estate upon death are the most emotionally difficult appraisals for our clients.  Although clients intellectually understand the need for an accounting and valuation of an estate in it’s entirety, it can feel like an invasion of privacy during the grieving period.  Knowing what to expect in the appraisal may ease some of this tension.    
        Taxable Estates: The IRS Form 706 Filing
        While clients may understand they need a personal property appraisal for Federal estate tax upon the death of a loved one, they do not always know what needs to be included in the appraisal.  As a general rule, all items of personal property owned by the decedent and those held jointly with the surviving spouse must be included in the appraisal.
        The value of a decedent’s estate is reported on Form 706.  The document records a “snapshot” of the net financial affairs of the decedent at the date of death.  Form 706 must be filed if the decedent’s gross estate exceeds the unified credit exemption equivalent.
        As stipulated by the IRS, the process requires a room-by-room itemization of household and personal effects.  All articles are named specifically, however items contained in the same room and each of which is valued at $100 or less are grouped.  For example, the every day dinnerware, glasses and small kitchen appliances are inspected expeditiously and grouped for purposes of the appraisal report. Items with intrinsic value such as sterling silver and fine jewelry and items with more than $100 of value must be listed and valued individually. 
        Non-Taxable Estates: Probate Filing
        Estates with gross value less than the unified credit exemption equivalent do not need to file a Form 706 with the IRS.  However, estate settlement in the state of Arizona requires estates to go through the probate process.  Once a personal representative is assigned that individual is tasked with locating all of the estate property, which must be inventoried and appraised.  Since Arizona does not have an estate tax, there is no specific requirement for the appraisal to include a room-by-room valuation of all personal property.  The duty of the personal representative is to make the inventory and valuation available to all interested parties and ultimately distributing the personal property.  In these cases, the appraisal is tailored to the needs of the client.  If the estate distribution is highly contentious, including more may be better than just itemizing items with a higher fair market value.  I have had many personal representatives in this situation thank me for doing a full itemization because the distribution of assets went more smoothly when a third party independent appraisal report is used.