An Important and Often Neglected Component of Estate Planning

Sil Coccia Migrated to Sonoma from New Jersey

30 years as a Sales, Marketing and Business Development Executive for a wide spectrum of companies and industries

Varsity Head Coach for girls basketball at Sonoma Valley High School for 8 seasons

Avid cyclist, attempt to play golf, love fine food & wine Married to the lovely Eileen and have 7 adult children

Who are we?

Eileen Coccia

Born and raised in Sonoma

30 years experience in the Art Industry

Over 10 years experience as a professionally qualified Appraiser

Enjoys hiking, cooking, writing and collecting fine art

Married to Coach Sil and has 7 Adult Children

Who are we?

They know the importance of understanding and managing their financial portfolio

They know the Value of their Home

People know what their vehicles are Worth

What People Know…

They Collect!

Fine Art, Antiques, Silver, Crystal, China, Wine & Memorabilia…and more

What People Do…

Many of your clients aren’t serious

collectors of one specific category

They have, however, over a lifetime accumulated a household of many different and diverse types of personal property

When they downsize their living situation their new household cannot accommodate present possessions

When they pass, a whole house of property is often left behind for heirs to distribute or liquidate

Lifetime Collectors

What Is All This Stuff Worth?

So, a critical question to ask is…

What is the VALUE of their

Personal Property, or

“Possession Portfolio”

In other words…

This Possession Portfolio was:

Stolen?

Lost in a natural disaster or fire?

Would it be possible to recover the full Replacement Value?

What if…

Shouldn’t Estate Plans ensure Equitable Distribution of valuable Personal Property?

And what about Heirs?

Many people make charitable donations of Art,

Antiques or prized collections during their lifetime and/or from an estate after death

How is the value for such generosity determined to satisfy the IRS for a specific Charitable Contribution?

Or Acts of Philanthropy...

Very few people think about the value of all their

personal property in advance of disaster, major life change or death

Therefore, they do not adequately plan for it

They believe their homeowner’s policy will “cover it”

They think that heirs will “civilly and equally” divide all their possessions once they are gone

The Critical Issues are…

The Personal Property Value may be as much as the Real Property Value

Or, in many cases is worth more than some of the other Financial Assets they have

And in Actuality…

That the Personal Property, or Possession, Portfolio

is indeed a very important component in the valuation, management and final execution, of an entire estate

That Personal Property is one of, if not the most, neglected components of the Estate Planning process

…Then, how is the opinion of value of the Possession Portfolio determined?

So, it’s fairly safe to say…

Defined as: “The act or process of developing an

opinion of value”

And, conducted by a Professional Appraiser:

“One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective. The Appraiser is neither an advocate nor representative and must protect the confidential nature of the appraiser-client relationship.”

Appraisers do not establish value, they document it from various sources of information.

Appraisals!

INSURANCE / SCHEDULED VALUE OF ASSETS

When personal property exceeds the amount of coverage for household contents in the policy

Typically indicated for individuals that have substantial inventories of Art, Antiques or valuable collections

Objective: determine the Retail Replacement Value (RRV)

“highest amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market”

Types of Appraisals

ESTATE APPRAISAL Equitable Distribution / Estate Settlement (Taxes) Typically done for fairly distributing

personal property amongst heirs and/or for Estate / Gift tax calculations

Employs Fair Market Value (FMV) : “…The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts.”

FMV is also used in Divorce / Dissolution settlement appraisals

Types of Appraisals

CHARITABLE DONATIONS Required by the IRS for all personal property

donations exceeding $5,000; Qualified Appraisal Summary attached to the return. For Artwork ≥ $20,000 the entire Self Contained Appraisal Report must be attached

Fair Market Value approach is used

Appraisals…

POV still adheres to the professional and ethical

standards that apply to appraisers and appraisals POV is a valuation report that provides clients

with a range of values and answers the question: “What is it worth?”

Effective consultative service for helping heirs sort out a household of possessions and provide them a “guide book” of knowledge to help determine possible selling prices or to assist with equitable distribution

POV’s not acceptable in legal proceedings, by the IRS and most Insurances

Much less expensive alternative when a formal Appraisal is not required or needed

Professional Opinion of Value (POV)

$$ $$

Inspection & Analysis: Measure, weigh,

photograph, scribe, and evaluate condition

Extensive Research & Data Collection: Internet, reference books, site visits, expert consultation

Valuation: Apply appropriate value approaches and methodology

Written Appraisal Report: Bound formal document with complete research results, market analyses, biographies, and photos

The Appraisal Process

A Competent and Qualified Appraisal Report should contain: A cover document explaining in detail what type of value is

being sought ("purpose") and how the appraisal is to be used ("function" or "assigned use")

The methodology and resources relied upon, including market analysis and market(s) selected.

A complete and accurate description of the property written in such a manner that it can be identified without photos.

The date(s) and location of inspection, and the effective date of value.

A statement by the appraiser that he or she has no financial interest in the property, or that such interest is fully disclosed in the report.

The appraiser's signed certification of the contents ignature.

Appraisal Report

DO NOT accept an appraisal if:

It is handwritten or unsigned

The fee is based on a contingency or upon the value of the property

The appropriate "purpose" and "assigned use" are not stated

The scope of the project is beyond the appraiser's expertise

The appraiser is not willing and able to defend it in court = ACCOUNTABILITY

Appraisal Reports

Elements of a Highly Qualified Appraiser:

Appraisers should be qualified by, and in compliance with, the ethical and professional standards of the

Uniform Standards of Professional Appraisal Practices (USPAP)

As set forth by the Appraisal Standards Board of The Appraisal Foundation (TAF)

Professional Standards

A Qualified Appraiser has formal education in

appraisal theory, principles, procedures, ethics, and law. The appraiser should be up to date on the latest appraisal standards

Appraisers should have extensive and relevant “real life” experience performing numerous valuations for the different types of personal property appraisal situations

A good Appraiser knows his or her limits, and is expected to consult with other experts when necessary

Maintains membership in and completes related continuing education coursework through one or more Industry Associations

Professional Standards

Maintains highest level of accountability and ethics

Personal Property Appraisers most often maintain an Area of Specialty Fine Art (often with subspecialties)

Antique Furniture

Ceramics (Porcelain & Fine China)

The Appraisal Foundation (or any other national governing body) does not “Certify” appraisers or appraisals—The critical criteria according to TAF is:

Strict Adherence to / Compliance with USPAP = Qualified Appraiser / Appraisal

Fosters public trust for valuation services

Professional Standards

Services used to sell off personal property

(household contents) at a very specific date and time

“Oral Appraisal” without USPAP compliance is really a “Pricing Service”

Not unbiased, impartial or objective, and acts as an advocate on behalf of the client to help sell the property quickly and gain from the sale

Estate Liquidators

Dr. Phil and wife Lisa; both in their 70’s

Neighbor across the street had all their valuable property stolen in a calculated robbery

Decided to have their most valuable personal property appraised for Insurance (RRV)

Possessed generations of sterling silver and expensive pieces of fine art, furniture

“Been meaning to do an appraisal but just kept putting it off until…”

Over $295,000 of property in only two rooms

Case Study #1

Couple from Sonoma, Ozzie and Harriet. Second marriage

for each; Ozzie significantly older and has health issues Ozzie had 2 sons from previous marriage, Harriet had no

children Ozzie’s father was a professional baseball player who left

him a very extensive and valuable sports memorabilia collection (over $110,000)

Ozzie and Harriet created a large collection of art and antiques themselves (over $215,000)

Estate Attorney advised them to get an appraisal for insurance purposes; also to be used as a “blueprint” for distribution of property(Dual Valuation)—especially the baseball memorabilia for his sons

Never had an appraisal done prior…

Case Study #2

Middle aged couple from Texas, George and Barbara

They wanted to donate several large wildlife paintings to Ducks Unlimited

Specific artist from California who was represented by Eileen’s gallery in the 1980’s and she had extensive knowledge of his work

Flew to San Antonio to physically inspect and appraise the items for IRS Charitable Donation; 5 pieces valued over $20,000

Case Study #3

Mike, father of six adult children, passes suddenly and

leaves behind a household of items collected over 50 years with no plan for dispersion or distribution

Co-Executors, Marcia and Greg requested a consultation and valuation proposal

ESC inspected the contents and recommended a POV for the 50 items deemed most likely to have significant value

Client used the POV report to equitably and amicably disperse the property amongst the six heirs

Case Study #4

Sooner or later most every estate has a need for an

appraisal or valuation of personal property assets Surprisingly, most do not have the slightest idea of

how to go about getting help...at least for a "formal" appraisal or in soliciting a “qualified" appraiser.

Personal Property is an important component of every estate; yet very often is overlooked or deemed not a priority by clients

There are several types of Approaches to Value depending on the specific appraisal and assignment requirements

Key Points to Take Away

Appraisals are extensive and thoroughly researched

valuation reports that strictly adhere to USPAP Appraisers are highly qualified professionals with in-

depth expertise who must remain impartial, ethical and a non- advocate

Clients gain the Power of Knowledge and the Peace of Mind that comes from an appraisal when included as part of their Estate Plan and best done while they are ALIVE

The Appraiser can be a valuable asset to Estate Planning Professionals on behalf of their clients in providing a wide array of valuation services

Key Points to Take Away

Thank You!!

“Assuring the Value of Your Personal Property Portfolio”

888-973-9652 | P.O. Box 2273, Sonoma, CA 95476

info@escappraisals.com | www.escappraisals.com