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New Paradigms in Estate Tax Valuation

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Assets that are held in estates may comprise of family limited partnerships, real properties, interests in partnerships, limited liability companies, common tenancies etc. For businesses and individual property owners, value of interests in the aforementioned assets becomes an important piece of information when transferring interests in estates or when planning estates. 

Business interests must be valued when they are transferred as a part of an estate or as a gift. To overcome the IRS challenges, you will need a professionally prepared and well documented valuation. If you are not in a position to prepare this valuation, then you will have to hire qualified and experienced valuation professionals who are accredited by reputed organizations—which are recognized by IRS. To provide well documented and supportable valuation analysis, valuation services work closely with accountants, attorneys and other financial planning professionals. Most financial valuation services cater to a wide gamut requirements including estate planning, charitable contributions, succession planning, family limited partnerships, gift and estate tax reporting etc. Out of these, gift and estate tax reporting is considered to be very challenging and demanding.

Estate Tax Valuation

There are many estate tax valuation services and selecting the best one can be a daunting task if you are not aware of the key characteristics. When you select a business valuation service, you will have to check their confidentiality terms and conditions. By and large, most business valuation services will not disclose your financial statuses and if they do, then it will be only for demo purposes. If you are a small business owner, it is imperative that you look out for a comprehensive and supportable valuation of your business, which is necessary to address potential IRS problems and challenges. When you meet the business valuation services for the first time, you will have to understand all pertinent facts and circumstances before you arrive at a deal.  

There is a standard process for business valuations that needs to be understood quite properly. There are some very important questions that need to be answered before the valuation process. Here are some of these questions: Who is the engagement for? What is the interest being valued? What standard of value will be used? Whose standards are being adopted? What is the premise of value? Once you have the answers to these questions, you can immediately start with the valuation. The main purpose for valuation is for gifting of interest to future generations. 

Estate planning is also done to minimize estate taxes. You would also do a business valuation to find out the value of your business in your estate. Finally, you will need to do business valuation because the IRS requires it. There are some very important terms that you will have to understand when you are planning for business valuation. These terms are fair market value, investment or strategic value, intrinsic value, fair value, liquidation value, etc. When you are with the business valuation consultant, you can ask him or her to explain the meaning of these technical financial terms.