SETTLING THE ESTATE

The fair market value for all of the jewelry in the estate must exceed $5,000 before IRS regulations come into effect.  IRS regulations say that for tax purposes, an appraisal must use fair market value.  In most cases, this is substantially lower than it would be for insurance replacement.  Pick an appraiser with professional qualifications to perform your appraisals since it can save tax and avoid penalties.

The estate has the option to choose the date of death or the alternate date (six months later) to determine value and tax liability.  If there is a sizable difference between the two dates, the date in which lowest values occur can be used.  This was critical during the 70s and 80s when the diamond and metal markets exploded and then crashed. Whichever date is chosen, it will apply to all the property in the estate. 

In the event some of the items have to be sold from the estate to settle court costs, attorney’s fees or taxes, there can be some tax relief.  For example, if a diamond ring had a fair market value of $20,000 and was sold by the estate for $10,000, the value of the estate can be reduced by the difference and consequently lower the taxes.  This can be done within three years of settling the estate with the IRS.  The proviso is that the item must be sold to someone commonly in the business of buying and selling similar items.  It can’t be sold to a relative, friend, neighbor, or associate.

 

EQUITABLE DISTRIBUTION of ESTATES - DON’T FIGHT!

It is not uncommon to see many families fight bitterly over the estate, even to the point where they will never speak to one another again!  This can be prevented if you plan ahead and prepare a will that specifically designates who will get what.  This requires the services of a professional appraiser to provide the Fair Market Value of the items.  It is not a good idea to use a retail replacement document used for obtaining insurance.
FMV takes into consideration economic and functional obsolescence.  Are the pieces no longer the “mode of the day”, or are they in need of major repair?  With this information, you will be able to make fair and intelligent decisions and eliminate the bloody aftermath!  One of the problems can be having one large diamond and two daughters.  In some instances, you may want to direct the executor/trustee to dispose of all or some of the items on a consignment basis and divide the money to the heirs.  Or, you may want to donate the estate to a worthy charity.