ggl_mail08[at]yahoo.com wrote:
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An accurate valuation is required for preparing the estate tax return.
That return lists the value of everything owned by the decedent, down to
automobiles and personal property like furniture. If the estate is
taxable in some way (at the federal or state level) the valuation
affects the amount of tax paid.

Also, when heirs sell property they inherit, their cost basis is the
fair market value at the date of death (or, if elected, an alternate
valuation date 6 months later). This is called the "step-up" in basis,
if the heirs end up with a cost basis higher than the decedent's --
which is the typical case. An heir benefits from a higher cost basis
because it reduces the taxable gain.

Simple example: you inherit $50,000 of IBM stock that the decedent paid
$10,000 for. The basis is stepped up to $50,000. You sell the stock for
$53,000. Your taxable gain is $3,000 (and it's long-term gain, for
inherited property, regardless of how long you hold the stock).

Now imagine the same scenario, only it's stock in a small business, not
shares of IBM. Someone would need to do an appraisal to value that
business. If they came in at $30k for your shares and you sold it for
$53k you'd have more taxable gain.

Rather than relying on the Internet I'd suggest spending 20 bucks on one
of the estate planning books from Nolo Press, they're excellent:
www.nolo.com

-Tad

On Aug 15, 5:23 am, ggl_mai...[at]yahoo.com wrote:
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If you are looking at business succession plans that often involve
cross-purchase buy/sell arrangements then it is wise to take a high
valuation. This is because you are planning in advance and can expect
the business to grow past its current valuation. And as you indicated,
when you are trying to sell a business or property you want to prove
it is worth as much as possible.

On the other hand, if you are planning for estate tax and inheritance
purposes, the lower the valuation the better. Any property or business
includable in your estate consumes some of your estate tax exemption.
Any amount over the the exemption limit is subject to taxation.

If a financial planner determines that you will likely have an estate
tax liability, there are various trusts and partnerships agreements
that can remove property from your estate. If this becomes the
situation, low valuations can also help for gifting purposes.

Like you indicated at the end of your post, there are times that a
high valuation best suits you and other times when a low one serves
best.

ggl_mail08[at]yahoo.com wrote:
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To keep your estate taxes down, or potentially to exclude your estate
from taxes at all.

-Will

In regards to estate planning, I am trying to learn as much of the
basics as I can on the web before visiting an attorney to get things
rolling.

One aspect that I am having trouble learning more about is the
valuation (appraisal) that is due to occur at some point in the
process.

What is the purpose of this valuation? (don't just say it is to place
a dollar amount on the value of the property... say why that dollar
amount is important and in what way) Why is it desireable to have your
property/business valued on the low-side for estate planning tax
purposes? (as opposed to encouraging a higher valuation for the
purposes of a sale or financing of the property).

Thanks for any input.