Types or Reasons to have an Appraisal
Estate Planning
The first step in estate planning is to take an inventory of assets. Assets include retirement and savings accounts, but also fine art and antiques. A written appraisal catalogs your collection into a comprehensive list. A FMV appraisal is helpful in proportioning your assets according to your wishes.
Insurance
A homeowner, renter, or condo insurance policy will typically cover the full value of personal property. Generally, personal property limits are 50% of the coverage for the dwelling. It is possible that a collection of fine art and antiques may exceed the limit. If the value of your personal property exceeds the policy limits, adding a rider or scheduling your fine art and antiques may be beneficial in the event of a loss. An appraisal to estimate the replacement cost will assist with adequate insurance coverage.
Equitable Distribution
Equitable distribution appraisals are often requested by judges during a divorce or settlement of an estate. When a couple files for divorce, disputes often arise in dividing up the things they own jointly, such as their home, cars, furnishings, and other items. Similarly, heirs of an estate are concerned about the monetary values of personal property in an estate and often need an objective opinion to settle disputes that often arise. A FMV appraisal assists the divorcing couple, heirs, and the judges involved in these cases in the division of personal property which might include fine art and antiques.
Estate Tax
When a decedent’s gross estate exceeds the unified tax credit exemption ($11.7 million in 2021, and $11.58 million in 2020), an estate is required to file an IRS Form 706 which captures a snapshot of the estate value as of the date of death. When the estate is less than the unified credit, filing an IRS Form 760 may be beneficial in establishing stepped up values when heirs plan to dispose of assets within a short time after inheriting. An appraisal to determine Fair Market Value (FMV) for fine art and antiques is used for IRS appraisals.
Damage/Loss Claim
Damage or loss in value to fine art and antiques happens as a result of fire, flood, theft, and accidents. The latter may occur at any time, but especially during the moving or relocation process. An appraisal is often needed to estimate the costs to replace or repair damaged and lost items.
Non-Cash Charitable Donation
Noncash contributions over $5,000 must be substantiated with a contemporaneous written acknowledgement, with a qualified appraisal prepared by a qualified appraiser, and a completed Form 8283, Section B, that is filed with the return claiming the deduction. —IRS Publication 526.
Loan Collateral
As is the case with real estate, loans with fine art and antiques as collateral often require an appraisal.
Litigation & Expert Testimony
Any of the types of appraisals listed above will help prevent costly litigation whether it involves the IRS, estates, insurance, or divorce. When litigation becomes necessary, a competent appraiser may assist in providing expert testimony as to value for any fine art or antiques.
Valuation of Inventory
Perhaps you own a collection of fine art or antiques and you are contemplating disposing of it for any number of reasons. A competent appraiser may assist in the disposition by providing a range of values for each item in the collection. The range in values might include liquidation to retail values and everything in between including FMV.