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Settling an estate and property values (how to settle on a value with heirs)<-- Return to News, Articles and Resources
What are Estate Appraisals?
Settling an estate is an important and sometimes stressful job. Attorneys and Accountants rely on appraisal values when calculating property values for estates, divorces, or other disputes requiring a value being placed on real property.
All too often, people do not fully appreciate the need to have a detailed real estate appraisal prepared in support of the numbers being used in documents filed with revenue authorities.
Opinions of value used in documents filed with the revenue authorities should be supported by a detailed report as to how the appraiser arrived at his conclusions. Such a report will certainly show the authorities that the numbers used are well founded and substantiated.
Having a professional appraisal gives the executor solid facts and figures to work with in meeting IRS and state agency requirements.
Practical Tips in Settling an Estate Containing Valuable Pens
Author: David S. Lande, a member of the New York Bar.
Regardless of whether a collector has planned for the disbursement of personal property following his or her demise, some practical steps must be taken if the property includes, among other things, potentially valuable collectible pens.
If the deceased is believed to have owned rare and collectible pens, but none can be located, a logical place to look is a safe-deposit box in a bank - usually, but not necessarily, the bank where the deceased did most of his or her banking. From time to time, people change banks for their everyday needs (checking and savings accounts, etc.), but generally do not transfer their valuables from one bank vault to another unless they move away a substantial distance.
Accordingly, if the location of the vault is not known, the executor of the estate should check those banking institutions where the deceased maintained routine accounts. Often this can be accomplished simply by sending a written inquiry and a copy of the death certificate to the bank. If all else fails, examine the decedent's checking account ledger - it may indicate payment of a vault fee, a good clue that a safe-deposit box exists.
If the deceased left a will, it may be necessary for the will to be probated before the safe-deposit box can be opened. An exception is the case in which the deceased is known to have had a will, but the will itself can not be found. Most states have a procedure for submitting an application for the issuance of a court order, allowing the applicant to search the vault for a will. The process of obtaining the court order usually is relatively simple, as it is intended to accommodate situations in which interested family members or friends may be acting, at least at the outset, without the assistance of a lawyer. However, depending on the procedures set forth by the state, it may be somewhat time-consuming.
Once the order is obtained, the bank generally opens the safe-deposit box in the presence of the family member or friend who obtained the order, permits an inventory of its contents, and then re-seals the box, pending other estate settlement. (In New York State, for example, the Bank is required to forward any will found in the vault directly to the Surrogate's [Probate] Court.)
If a will has already been probated, or if no will exists, then the executor or an administrator appointed by the Court can open the vault, subject to the laws and rules of the agency that collects state estate taxes. At one time, New York required a representative of the State Department of Taxation and Finance to be present when the vault was opened, obviously to prevent families from concealing valuable assets - such as cash, jewels, or valuable collectible pens - in an attempt to avoid estate taxes.
However, in this age of budget-strapped government agencies, the procedure has been eliminated. Instead, a representative of the estate must apply to and obtain from the state taxation department a form known as a "tax waiver" for the contents of the vault. The certificate waives any claim the taxation department may file against the bank for turning over valuable contents of a vault to an estate representative who subsequently fails to declare the items on the state estate-tax return.
Distribution or Liquidation?
Once the pen collection is located, of course, some determinations and decisions must be made. Obviously, the heirs should identify the items and estimate their value to the best of their ability. (If the decedent's collecting interests were unusual or exotic, the assistance of an outside expert will be necessary.)
If the will indicates the property is bequeathed to specific persons and/or organizations, then typically the only legal issue remaining is one of valuation for tax purposes. If there was no will, one or more of the heirs (that is, the relatives who stand to inherit the property under state intestacy law) may wish to receive the property as part of a general distribution. In the latter case, the value of each item may become a significant factor in the distribution, but a conscientious administrator will attempt to settle these issues with the heirs. If a settlement is reached, a simple contract recording what was agreed will suffice; if not, it probably will be necessary to liquidate the property.
Unless the market for the valuable pens is high (or volatile, reaching sporadic high points), the sale of the items should be deferred. Most states provide that the executor or administrator need not make any distributions to the legatees of a will or to the heirs of an intestate estate for a certain period of time. (In New York that period is seven months from the time the estate is officially "opened" by the court.)
This provision gives creditors time to learn of the death and assert any claims they might have against the deceased. If such claims are made to the executor or administrator, they must be paid, along with other known debts and administrative expenses (such as taxes) before any distributions can be made. In fact, custom and practice dictate that the time period for making distributions to legatees and heirs may be considerably longer than the prescribed period.
A waiting period may provide enough time to consign the pens and sell them at an auction, such as those usually held as part of one of the many scheduled regional pen shows throughout the United States each year. It may also be possible to consign the items through a dealer for sale at a particular regional pen show.
The expedience of liquidation should never be given priority over selection of the method of sale, especially when that method is something other than public auction. Generally, the auction route may be preferable because it is thought to provide the greatest assurance that current market prices will be obtained and that unfair advantage will not be taken of the consignors' ignorance of collectible pens. The larger the auction, the greater the exposure of the items to the pen-collecting market, and thus the greater the likelihood the items will command fair prices.
The main question that arises in the sale of a deceased's pen collection involves the need to obtain a formal appraisal, regardless of whether the property is to be distributed or liquidated. Often it is advisable to wait before obtaining an appraisal, as it can be expensive and require some time for completion. Ultimately an appraisal may not be necessary. In the case of a relatively small estate, or even a large estate involving collectible pens of relatively small value, an appraisal may not be required. In essence, it is up to the taxing authorities: the Internal Revenue Service (IRS) if the estate is large enough to be subject to federal estate taxation (more than $650,000 in 1999, and increasing incrementally to $1,000,000 in 2006), and up to the state taxing authority if it is below the level of federal estate taxation, but nevertheless subject to state estate taxation (many states do not impose any estate tax, and many, such as New York, do).
Of course, the heirs - and more significantly, the lawyer handling the estate - may be totally in the dark about the value of the rare and collectible pens, and therefore unable to decide if a formal appraisal is required. Under those circumstances, most community-minded pen dealers are willing to give off-hand, verbal opinions about the approximate value of the items, giving the family or executor the information they need to decide whether to obtain a formal appraisal or wait for a specific request for one from the state taxing authority. Collectible Fountain Pens, by Glen Benton Bowen, and Fountain Pens and Pencils, by George Fischler and Stuart Schneider, Second Edition, provide some help in fixing approximate values, even though the family or the estate lawyer are likely to be totally helpless when it comes to assigning the correct condition or grade to the items and may even have trouble attributing them to the catalog listings. The estate will be best served if a knowledgeable collector or dealer or organization such as Pen Collectors of America is enlisted for this preliminary step. If it is determined that a formal appraisal is necessary (for example, if the state taxing authority requests a formal appraisal to verify the value of the collectible pens declared on the estate tax return), it is advantageous to secure an appraiser who will provide accurate valuations for a reasonable fee. The estate administrator or lawyer should at the least confine the selection to a PCA member - dealer.
Of course, as in any area involving the law, it is impossible to cover every situation that might arise. Depending on the personal income-tax situations of the legatees or heirs, there may be tax advantages to donating the items to a museum or other institution, even if no such charitable provisions were made by the deceased. Only the advice of a knowledgeable attorney - and rare pen advisor - can provide maximum assurance that all options have been considered and the best choices have been made.
This has been the second and concluding article about estate-related considerations peculiar to the owner of rare pens and pen-related items. The first article, Estate Planning for the Pen Collector, is a guide addressing some of the issues before the collector's death, and this article, Practical Tips in Settling an Estate Containing Valuable Pens, discusses points to be considered following the collector's death. Neither article is intended to be a "Do It Yourself Guide," nor a comprehensive "reference". Rather, both borrow on the accumulated knowledge of a professional in the field, who happens to be a passionate follower of those seductive little items known as fountain pens. There are points to consider in the legal aspects of estates peculiar to the rare pen collector, and the best source of knowledge is, of course, the trained professional: a lawyer who bears the confidence and trust of the person or persons seeking a knowledgeable treatment of those points.
David S. Lande is a member of the New York Bar, an active collector of vintage pens, and a member of the PCA. The author is a New York City attorney in the field of estates, trusts, and related matters, and has published previously in this field of law.
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