Keeping an inventory of estate assets is a vital part of any Estate Trustee’s estate administration plan. An inventory helps the Estate Trustee identify each asset and establish its date-of-death value. Specific requirements regarding the form of the inventory may vary between jurisdictions. However, the general structure is to include assets listed by asset class with all relevant details identifying the assets’ location, its value, and how its value was determined.
Obtaining a valuation of assets helps the Estate Trustee fulfill various duties including:
- determining estate administration tax and other applicable taxes;
- calculating the amount of insurance that may appropriate;
- establishing a deemed disposition value for the deceased’s final tax return;
- understanding obligations if a division of family assets is required;
- determining the list price for assets of the estate that should be sold; and
- calculating executor compensation.
It is important for an Estate Trustee to understand that the purpose of a valuation can affect the method by which the asset is valuated. For example, when valuing an asset for probate or income tax purposes, the value of an asset is the amount that could be obtained in a sale on an open market, also known as the “fair market value” (FMV) of the asset. In contrast, when valuing assets for insurance purposes, the Estate Trustee must identify the replacement value, or in other words, what it would cost to rebuild or replace this asset if was lost, stolen, or destroyed. Accordingly, when obtaining a professional opinion of value, the Estate Trustee should clarify the purpose for the valuation.
The type of asset may also determine the method for valuation; different methods are used to determine the value of different types of assets. In some cases, there is more than one way to determine value, which will require the Estate Trustee to choose the most appropriate method. For this reason, an Estate Trustee should understand the various factors to consider when choosing a valuation approach, including cost, purpose of the valuation and the risk of the valuation being challenged.
The following list provides examples to illustrate the range of valuation methods used for different types of assets:
- Publicly Traded Securities (stocks, bonds) are valuated using closing prices for the date of death or last trading.
- GICs, Canada savings bonds, and other fixed interest vehicles can be valued by using the face value.
- Businesses interests should be determined by retaining qualified business valuators. The nature of the business will further dictate the valuation method.
- For personal and household goods, collections, and valuables, specialists should be used where appropriate. Auctioneers may also assist.