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Probate and Estate Litigation Blog

Certain Minnesota estates may be hard to value

Over a lifetime Minnesota residents collect and earn a variety of assets. These assets can include original artworks, collections, stock options, cash, real estate, a business and other various personal property. Upon a person's death, these assets become part of the person's estate. Part of the estate will be used to settle people's affairs and part of the estate will be used to pay taxes. However, the rest of the estate will be used as an inheritance and be distributed according to the estate planning documents.

However, before an estate can be distributed it must be valued. The value of the estate will be important for many reasons. The value of the estate will determine the amount of the taxes owed and the amount of inheritance for the heirs of the estate. For many people in Minnesota, the valuation process will be fairly straightforward. However, experts say that sometimes people have hard-to-value assets that can make the process more complicated.

For example, people who own businesses that are dependent on them - like a doctor - will have a harder time valuing their business. This is because a business' value can drop significantly after the person dies. Also, people with extensive and unique collections may have a harder time valuing their estate since a niche buyer is required before any money can be made. Finally, it can be hard to value collections, such as artwork collections, in which the worth of each item will go down if too many are sold because money can only be made over a long period of time.

Generally, the IRS will value the estate on the date of the person's death. However, this can lead to problems when the estate is difficult to value. In these situations, the IRS may be willing to delay a valuation by up to six months. The IRS may also be willing to apply a blockage discount for people with estates that cannot liquidate an estate immediately without losing value.

Minnesota residents should make sure they understand how their estates will be valued. Further, estate administrators should understand IRS rules when they have difficult to value estates so they can best protect the assets of the estate.

Source: The New York Times, "Putting an Estate Value on the Assets Unique to You," Paul Sullivan, Sept. 27, 2013

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