When someone dies, their “stuff” or belongings are now called “estate personal property.” While they were always the decedent’s possessions, this classification of estate assets has new meaning for heirs, executors, the IRS, and probate courts. During dissolution, when the name changes, the question becomes, “Does it have any value?” This is where the services of a professional appraiser may be necessary.
If you’ve ever seen Antiques Roadshow, you know an appraiser can determine, within a range, the estimated value of an item. In an estate, this is significant because if Bill wants Dad’s $10,000 watch, and Mary wants the family’s $10 salad bowl, getting these numbers right will be essential to ensure equitable distribution. (Mary’s going to get some cash to make it equitable.) As not every estate is going to require an appraisal, and every state differs on the requirements of inventory of personal property, this article will not answer the question, “Does our estate require an appraisal?”
Because appraisal requirements vary by state, consult your estate attorney or a tax professional to determine if a formal personal property appraisal is needed. However, understanding appraiser expertise and qualifications is central to personal property appraisal for an estate. If an appraisal is deemed necessary, it’s a good place to begin.
The need for a professional appraisal of the personal property of an estate may be for ensuring equitable distribution, estate tax requirements, or to educate the estate about the real value of an item so the estate can make an informed sale.
Keep this in mind, for every, “I got this at an estate sale for X”, story, there is someone who didn’t know the value of what they were selling. A professional appraiser can help.
The professional appraiser’s deliverable to the estate is the Personal Property Appraisal Report. As executor, you’ll want it to bear the scrutiny of the probate judge, the IRS, your combative brother, your combative brother’s combative attorney, et al.
The Personal Property Appraisal
If we were to generalize, to create an inventory of personal property and assign fair market values to each item in the average American estate, you need an estate appraisal by a generalist. This means they will appraise across a wide scope of items. If they come upon a collection, an item of high value, or an item they deem beyond their expertise, they may recommend a specialist. (Many generalists also have an area of expertise where they can specialize in addition to general appraisal.)
In summary, the appraiser will access and inventory the personal property contents of an estate to determine Fair Market Value.
The IRS defines Fair Market Value as outlined in 26 CFR 20.2031-1(b), as, “fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the item’s location wherever appropriate.”
The inventory will be submitted in the personal property appraisal report. This report is often submitted in probate and is used to determine the value of the estate and the value of individual items distributed to beneficiaries. The appraised values may also be used for liquidation purposes to help the estate realize a fair price at sale. Property not material as an asset of the estate, or property classified as de minimus, will not be appraised.
The Uniform Standards of Professional Appraisal Practice (USPAP), published by The Appraisal Foundation, is a guide for conducting a professional property appraisal and is generally accepted as the minimum qualification for personal property appraisers. To achieve USPAP compliance, Personal property appraisers initially complete a personal property-specific 15-hour USPAP Course. To keep USPAP compliance current, they must complete a personal property-specific 7-hour USPAP update course with every new release of USPAP.
Appraiser Qualifications
The Appraisal Foundation sets the Congressionally authorized standards and qualifications for personal property appraisers and, per their website, “provides voluntary guidance on recognized valuation methods and techniques for all valuation professionals.” The Appraisal Foundation also sets the standards for real property appraisers.
Three primary professional organizations work with The Appraisal Foundation to “uphold public trust in the appraisal profession through communication and collaboration,” specifically related to personal property appraisal. Through professional education, establishing levels of accreditation and codes of ethics, they provide standards for the profession of personal property appraisal. It is worth noting that the scope of professional appraisal extends beyond personal property. Appraisal of real property, business valuation, etc. are included under the purview of professional appraisal.
See: The Appraisal Foundation’s Personal Property Appraiser Qualification Criteria
Appraisers Association of America
The Appraisers Association has two designations conferred on members based on market experience. All members must take and pass a 15-hour USPAP class and produce USPAP-compliant reports, and comply with their Code of Ethics.
Accredited Appraiser – Must have a minimum of 5 years of market experience, submit references, take 120 hours of qualifying education classes in the Theory and Methodology of Appraising, and submit 3 sample appraisal reports (Insurance, Donation, and Estate) in their area of specialization experience.
Certified Appraiser – Certified Members: Must have a minimum of 10 years of market experience, submit references, take 120 hours of qualifying education classes in the Theory and Methodology of Appraising, and submit 3 sample appraisal reports (Insurance, Donation, and Estate) in their area of specialization. Additionally, Certified members take a 7-hour closed-book exam in their area of specialization. Certified members have the “AAA” after their names.
All members are required to submit materials for review every 10 years to maintain their membership. This consists of taking 140 continuing education credits and the 7-hour USPAP update course every two years.
See Also:
- Find an Appraiser. Locate a personal property appraiser by specialty or location.
- About USPAP
International Society of Appraisers (ISA)
The ISA offers three levels of credentials that are connected to membership, experience, and requirements that reflect levels of experience and expertise. All ISA members adhere to USPAP standards, ethics and must have current USPAP certification. ISA also has a Code of Ethics that must be acknowledged by each member when they pay their annual dues.
Member – ISA – Appraiser must complete the Core ISA training in appraisal theory, methodology, ethics, and report-writing standards. This includes completion of the ISA Core Course in Appraisal Studies, followed by a proctored final exam. The candidate must document three or more years of market-related experience. Upon the successful completion of these requirements, the appraiser may add the ISA credential to their name, followed by “Member of the International Society of Appraisers.”
Accredited Member – ISA AM – The ISA Accredited Member or AM is required to have met the Appraisal Foundation’s criteria of “Qualified Appraiser”, as defined by the AF Appraiser Qualifications Board (AQB). See also: AQB Personal Property Appraiser Qualification Criteria. Please find the details on the ISA AM requirements HERE.
Certified Member Credential: ISA CAPP – Per the ISA website, “The ISA CAPP credential is the highest achievement in ISA credentialing. It signifies appraising expertise, professional development, and advanced skills.” Please find the details on the ISA CAPP requirements HERE.
Once someone has earned their ISA, AM, or CAPP, they must remain an ISA member in good standing as well as complete ISA’s requalification process every 5 years.
See Also:
- The ISA Find an Appraiser search is a tool available to the public to locate a specialist by keyword or find an appraiser by location.
- ISA USPAP Course
American Society of Appraisers (ASA)
The minimum requirement of ASA membership is that members complete the 15-hour (Personal Property specific) USPAP and adhere to the ASA Code of Ethics, passing the online ethics exam.
The ASA proffers two professional designations, Accredited Member (AM) or Accredited Senior Appraiser (ASA). Both designations require a candidate to submit appraisal reports for peer review. Candidates must also pass the Four ASA Personal Property Principles of Valuation Courses (or qualify for an education equivalency) and pass a 4-hour exam in the area of their specialty.
The Accredited Member designation requires 2-5 years of full-time appraisal experience, and the Accredited Senior Appraiser requires 5 or more years of full-time appraisal experience.
Once someone has earned their AM or ASA, they must remain a member in good standing as well as complete reaccreditation every 5 years.
ASA members who do not attain either the AM or ASA designation are considered Candidate Members.
See Also:
- The Personal Property Quick Guide provides an overview of the ASA accreditation process.
- The Personal Property (PP) Guide to Accreditation specifies more details of these designations and provides the full list of appraisal specialties.
- ASA’s Find an Appraiser is an online tool that consumers can use to find an appraiser in their area. There is also a chat feature on the ASA webpage that many consumers use to chat with ASA staff to find an appraiser.
Conclusion
When an estate contains physical assets that need to be accurately valued for distribution, taxes, probate, insurance, or other purposes, a professional personal property appraiser brings clarity to the process. A little understanding of USPAP, the process and the designations conferred upon professional appraisers can help an executor’s understanding of the needs of the estate.
A discussion with your estate attorney can help determine what is necessary. Ask questions. Hopefully informed questions thanks to a bit of reading!
Thank you…
Thank you to the following organizations and individuals who assisted with this article…
Appraisers Association of America (AAA)
The American Society of Appraisers (ASA)
International Society of Appraisers (ISA)
Robin Rankow, thank you for your help!
Read More: Personal Property Appraisal
The Appraisal Foundation – The Personal Property Owner’s Guide to Appraisal Services