How do I value my estate?

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Calculating the value of an estate can be useful for many reasons. In some instances, a personal representative may need to calculate the value of a deceased’s estate for tax and distribution purposes. In other instances, a testator may wish to calculate the value of his or her estate to help make informed decisions about their Will and provide a helpful starting point for their eventual personal representative to fully account for all the assets and liabilities of their estate.

When calculating the value of an estate, it is essential to understand what the “estate” truly consists of and the ways in which a value can be assigned.

The principle is simple (even if the calculations are not); the value of an estate is the assets of the estate minus any and all debts or liabilities. The following steps form a quick guide to calculating the value of an estate.

Step 1: Select the Date of Calculation

Living Person’s Estate

Since the value of assets fluctuates over time, it is important to choose a specific date as of which the assets are valued. Items are typically valued with reference to their ‘fair market value’, which means that the valuation may be higher or lower than the original purchase price. When calculating the value of a living person’s estate, any valuation date may be chosen which is appropriate for the purposes of the valuation.

Deceased’s Estate

In choosing the calculation date for a decedent’s estate, the valuation date will generally be the date of death.

Step 2: Determine the Assets that Contribute to Your Estate and Calculate the Value

In order to calculate the value of an estate, the assets must be totalled. Real property, such as a personal residence, is typically the most valuable asset. Other assets include money held in bank accounts, and personal possessions such as motor vehicles, jewelry, household contents, etc.

Assets may also include:

  • Pensions
  • Savings
  • Life Insurance Policies
  • Stocks
  • Bonds
  • Mutual Funds

While they will not necessarily be relevant for valuation purposes, it is also useful to inventory assets without significant monetary value that are relevant to the administration and distribution of the Estate (for example, photo collections and digital assets such as social media accounts).

Step 3: Calculate Deductions

Deductions include debts owed by reason of the decedent’s death (such as any outstanding tax liabilities), as well any other debts owed at the time of death (or as of the valuation date). While this list not exhaustive, debts and/or liabilities may include:

  • Credit Cards
  • Loans
  • Mortgages

Note that most deductions (other than mortgages) will not be applicable for the purpose of valuing an estate for probate fees or estate administration tax (in jurisdictions where that applies).

For further information or assistance with with an estate valuation, please consult a TEP.

Disclaimer

An article of this kind can never provide a complete guide to the law in these areas, which may be subject to change from time to time. The opinions and suggestions made within this article should not be interpreted as specific advice in relation to any particular individual or individuals. Neither STEP, the article author or their firm accept responsibility for any loss occasioned by someone acting or refraining to act on the basis of the opinions and suggestions contained in this article. More