ICLEF Law Tips – Valuing Assets

Welcome back to Law Tips. Break out your calculators. The continuing topic relating to estate law this week is valuing assets.  Or, maybe you prefer to just lean back in your chair and absorb a few reminders.

Appreciation goes to Rebecca W. Geyer, a partner at Drewry Simmons Vornehm, LLP, Carmel , Indiana, for her presentation as an ICLEF faculty member in “120 Hot Tips in Estate Practice.”  Rebecca is a frequent lecturer on estate planning, taxation, and elder law-related issues.  In the 2011 CLE seminar on Estate Practice she provided an update for attorneys with clients who need to determine the value of assets.  Here are two of her tips:

Valuing Mortgages, Promissory Notes, Accounts Receivable and Installment Obligations
The fair market value of a note, an account receivable, an installment obligation, or any other obligation owed a decedent is the balance due on the appraisal date.4  The value may be reduced if valid evidence is submitted to support (1) the debtor’s lack of ability to pay; (2) the possible uncollectibility of the debt; and (3) any other factor that would cause a decrease in values5 If the decedent held a promissory note or mortgage for money he or she lent to others, a copy of the document and proof of payments made should be attached to the inheritance tax return.6

Valuing Stocks, Bonds and and Mutual Funds
45 IAC 4.1-5-3(d) provides that the fair market value of a United States treasury bond is the redemption price accepted by the Internal Revenue Service in payment of the federal estate tax.  The date of death value of most United States Treasury Bonds may be obtained online  through the Bureau of Public Debt at http://www.treasurydirect.gov/BC/SBCPrice.

A savings bond calculator can be found at  http://www.treasurydirect.gov/indiv/tools/toolssavigsbondcalc.htm. The calculator will require you to enter the month and date the bond was purchased, the type of bond, and the bond serial number and will provide you with the current value of the bond, including accrued interest.

The fair market value of actively traded stocks and bonds is generally determined by calculating the mean between the highest and lowest quoted selling prices on the appraisal date.7  Historical stock prices can be found online on a number of financial websites including  http://bigcharts.marketwatch.com/historical/. Be aware that the fair market value of a share of stock also includes a declared but unpaid dividend if the date of record occurs before the date of death.8  For example, if a decedent died on November 17, 2010 owning shares of stock in MetLife, the value of each share of stock would be determined as follows:

MetLife Highon 11/17/10: 39.13
           MetLife Low on 11/17/10: 38.46

The high and low would be added together for a total of 77.59. That total would then be divided by two to obtain the average stock price, which is equal to 38.795. The number of shares owned by the decedent would then be multiplied by 38.795 to determine the total date of death value.

Mutual funds are valued at the bid price which the company is required to redeem an outstanding share.9 If the mutual fund is held as part of a brokerage account, the financial institution which holds such account should be able to provide the date of death value for the fund after receiving a copy of the decedent’s death certificate and an Authorization to Release Information.

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I hope you found this information helpful in assisting your estate clients or, perhaps, in your own planning.  Once again, ICLEF thanks Rebecca Geyer for agreeing to help out with her asset valuation advice.  You can get the full dose of estate law updates from our 24 faculty members by attending one of the Video Replays this month or by watching the Online/On Demand Video of 120 Hot Tips in Estate Practice by Clicking Here.

Do you have comments on this blog or other ICLEF matters? Send us your suggestions by email at nancy@iclef.org or leave a comment at www.facebook.com/ICLEF.  Thanks for reading Law Tips.

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4    45 IAC 4.1-5-8(a)

5 45 IAC 4.1-5-8(b)

6 Id.

7 45 IAC 4.1-5-3

8 45 IAC 4.1-5-5

9 Id.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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