Why to Include an Appraisal in the Estate Planning Process
- Appraisals of privately held business interests (stock, partnership units, etc.) are required by IRS regulations to support values claimed on estate or gift tax returns.
- The costs of appraisals are deductible expenses on estate tax returns and sometimes in estate planning (e.g., family limited partnerships)
- From the client’s perspective, a good appraisal provides the client some insurance against an IRS audit and professional support in case of audit.
- The independence, expertise and experience of the appraiser are critical to establishing a credible value in an appraisal (and the IRS knows the difference).
- Often the appraiser can assist the attorney in structuring an estate plan that will maximize the tax benefits for the client by providing the attorney with strictly a “value” point of view.
- Often an appraisal provides the client with a benchmark of value for his or her asset so that subsequent appraisals will illustrate the growth in value.