Estate administration frequently requires that personal representatives (commonly known as executors) manage and eventually sell the estate’s assets. Some estate plans leave instructions for personal representatives to transfer specific property to certain individuals. Other times, the goal is to liquidate assets and distribute proceeds according to the deceased person’s (testator’s) instructions.
The personal representative administering an estate has a fiduciary duty to beneficiaries. They should act in their best interests, which often requires that they maximize the overall value of the estate to optimize what beneficiaries inherit. Properly valuing estate assets if the testator has instructed that they be sold and the proceeds given to their beneficiaries is a key element of upholding that duty.
The value of assets changes over time
Determining what the testator paid for certain assets years ago is not an effective solution for valuing them. The home that they purchased 30 years ago has likely appreciated in value substantially since then, while the vehicle they bought five years ago may have a significantly lower fair market value than when it just came off the lot.
Personal representatives may need to research individual assets to determine what they are worth on the open market. That way, they can set appropriate prices when selling those assets to ensure that beneficiaries receive as much of an inheritance as is possible.
In some cases, the guidance of professionals may be necessary. Real property, business holdings and other high-value assets, such as fine art, may require the insight of a specialist for an accurate valuation.
Personal representatives can also benefit from legal guidance to help ensure they uphold their fiduciary duty and properly manage estate assets. Having legal guidance throughout estate administration limits the likelihood of personal representatives making mistakes that ultimately damage the value of the estate.