| Bar Bulletin |
May,
2003 |
|
Monthly Focus Articles |
|
Understanding the Auctioneer and the Appraiser Roles
in Estate & Probate
By Cindy Isennock
Baby Boomers stand to
inherit billions of dollars in the coming years. The popularity of living
trusts and sophisticated tax planning methods have created a greater
demand for and participation of qualified appraisers and auctioneers.
Understanding the role of the auctioneer/appraiser is paramount in gaining
credible information and giving service to clients.
An appraisal, for
either a living trust or for probate, is more credible to the IRS than an
opinion from an heir, an owner or even a letter from a real estate agent.
Audit rates for federal estate tax returns are approximately 20 percent,
almost 10 times the audit rate for income tax returns. Each federal estate
tax return is “hand-screened” by experienced estate tax examiners to be
classified for audit. The IRS expects the number of estate tax returns to
grow as the population ages. Substantial penalties (20 to 40 percent) are
applied for significant under- or overvaluations of property. Tax and
circuit courts often look to the appraiser with superior credentials and
methodology along with local experience as the best resource for accurate
information. There is a non-exhaustive list of when appraisals are needed.
Some of the most common needs are when property is sold to a relative,
partitioning of an estate among heirs or beneficiaries, prior to listing a
home for sale, partial interest (typically income property), federal or
state estate tax returns, gifts and trusts, and determining the basis for
capital gains. Appraisers who work hand in hand with attorneys,
accountants, trustees, executors and administrators have knowledge and
experience with these complicated issues. Appraisers are trained and
licensed and are required to continue their education to remain accredited
to practice their trade. The professionally recognized organizations,
guilds and associations set very high standards to which appraisers must
adhere. The unified standard of practice and procedure (USPAP) is the
industry’s ethical measure. In looking for an appraisal firm with which to
affiliate, choose the appraisers who describe themselves as USPAP
compliant.
The auctioneer can
quickly and effectively put money into the estate or directly to the heirs
and beneficiaries. Auctioneers today are educated marketing professionals
who are well-versed in their field. Trained and licensed in their
occupation, auctioneers are highly technologically informed and very
detail-oriented. Creating a win-win situation through tried and true
practices dating back to ancient Greece, modern auctioneers spend many
long hours to prepare for and to orchestrate a single auction. The auction
industry is the last true vestige of “Free Enterprise” competition that
exists, and that allows for the auction sale of everything from livestock
to mansions. Auctions eliminate lengthy turn-around time for sellers, and
buyers are able to buy at the price they determine. When discussing your
client’s needs with the auctioneer, you can expect a few things, first and
foremost being respect for the seller. No matter what the circumstances
might be, you will find that the professional auctioneer has had numerous
similar experiences and can assist in making a difficult time less
stressful. Knowledge of the marketplace is a strong asset in changing
times. Auctioneers are skilled in watching trends and can advise you when
to sell or to hold an item for the best price. Active promotion is the
best way to stimulate interest and attract more buyers. Auctioneers know
how to reach the marketplace. The Auction method of selling recognizes the
time value of money. It is the only method of marketing Real Estate and
Personal Property that allows a seller to convert assets to cash in one
day, both quickly and effectively.
The relationships you
make today will be your business of tomorrow. Affiliating with auctioneers
and appraisers may give you another value-added service that today’s
clients are seeking, a one stop approach for caring for the needs of
families both young and old.
