Complications in Valuing Specific Assets for Estate Tax Purposes

Complications in Valuing Specific Assets for Estate Tax PurposesAfter a person passes away, the value of an estate must be calculated before the estate can be distributed to one’s beneficiaries. The process of determining the value of particular types of assets as well as the net estate for purposes of distribution to one’s family members, charitable organizations and/or loved ones can be complicated so our Estate Planning Lawyers have provided some examples of the complex valuations process associated with some common types of assets. This is a complex issue and many different types of assets are calculated in unique ways so it is important to speak with an experienced estate planning attorney in New Mexico if you have specific questions about your situation.

Value of Real Estate:

The value of real estate for estate planning purposes will typically be the fair market value of the property. Some of the factors that will impact the fair market value (FMV) of real estate includes:

• Condition, age and size of structures on the property
• Applicable zoning laws
• Unique characteristics of the property
• Physical conditions on the property
• Location and size of the tract
• Net income generated by the property
• Appropriateness of real property for current or intended use
• FMV of comparable properties in the area
• Expense associated with making the property marketable
• Probate court valuation

The value of real estate also may be impacted by co-ownership of the property. The IRS may allow the value of the property to be discounted for estate tax purposes provided the co-owner is not a family member or business associate.


The value of annuities for purposes of estate taxes also is the fair market value of the annuity. When an individual inherits a stream of annuity payments, the value of the payments must be calculated for estate tax purposes. When the annuity is issued by an insurance company, the value of the survivor benefits are based on the premium charged for the issuance of a single life annuity based on the survivor’s life as of the date that the deceased passed away. In the case of a private annuity, the value is derived from the present value of future payments.

Ownership Interest in Family Business:

If you have closely held stock in a family business, valuation of the stock for estate planning purposes can be complicated because the stock is not publicly traded. Some of the factors that will be relevant in determining the value of the stock include:

• Annual dividends
• FMV of comparable stock in publicly traded companies
• Economic conditions and outlook for the industry in the economy
• Stock’s book value
• Price paid for recent sale of company stock
• History and characteristics of the company
• Potential earning capacity for the business

Those who only hold a minority interest in the business such that they do not possess the ability to influence daily business operations and/or decisions or to force the sell, liquidation or similar disposition of the company may be entitled to a discount in the valuation process.

If you have questions about your potential liability for estate taxes or the valuation process for particular assets, the Estate Planning Lawyers at Life Leaf Legal Group, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation. Call us today to schedule your free consultation at 505.856-3591 to learn about your rights and options.
The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.

Comments are closed.