When an Appraisal Matters

If you suddenly find yourself needing to make decisions about what to do with a household full of belongings, you may feel overwhelmed. This is completely understandable. There are seemingly many choices to make. If you, like most people, have limited (if any) experience with this kind of thing, you may struggle to know how to proceed. This issue may be exacerbated if you aren't sure about the value of the belongings. Do you have hidden treasures? Might there be a valuable antique or other family heirloom? No one wants to be the one who accidentally sends a Tiffany lamp to the second-hand store. So, how do you proceed?

Situations Where an Appraisal Is Typically Required

There are definitely circumstances that demand a formal, written appraisal performed by a qualified appraiser. These circumstances include:

• Non-cash charitable contributions above IRS thresholds: Generally, items worth more than $5,000 must be appraised to qualify for the tax deduction.

• Estate and trust administration: Consult your attorney for legal advice. The risk is that inheritance tax may not be paid accurately unless estate contents are appraised correctly.

• Insurance scheduling and loss claims: Check with your broker. Often, standard homeowners (or renters) policies do not cover "luxury" or unusual items such as antiques, high-end furnishings, valuable art, jewelry, or large collections.

• Equitable distribution scenarios: In divorces, if both parties cannot agree on the value of their jointly held belongings, a neutral, third-party appraisal may be required.

  
  

Situations Where an Appraisal Is Often Overlooked—but Shouldn’t Be

Here are some additional examples of circumstances where an appraisal can be useful:

• Dividing personal property among heirs: Even when there is no discord among heirs, it can still be helpful for everyone involved to have monetary values attached to belongings. This way, decisions can be made with a clear understanding. If there are disagreements, an appraisal can help solve problems and ensure equitable distribution.

• Downsizing before a move: Moving to a new home often triggers a round of downsizing—getting rid of personal property deemed unworthy of taking with you. An appraisal at this point can help you make informed decisions during what can often be a stressful time.

• Pre-sale planning for collections: If you are considering selling a collection, you shouldn't rely on the estimates given to you by the auction company. An appraisal will almost always provide a more accurate picture of its true value. Having this knowledge will help you make good decisions about what to keep, what to sell, and what to give away.

• Updating outdated insurance schedules: Markets change over time. Collecting trends shift. Artists and makers fall in and out of favor. Decorating styles come and go. If you've had your collection or other valuables appraised for insurance purposes once, you should get that appraisal updated regularly. This ensures your level of coverage remains properly set—not too high, not too low.

  
  

The Cost of Skipping the Appraisal Step

There are several risks associated with not having an appraised value for your property before making decisions about it. You may find yourself under- or over-insured. This could mean being unable to recover adequately following a loss or paying too much in premiums for insurance you don't need.

When taxes are concerned, if an appraisal is not done when it should be, you run the risk of increasing your chances of an audit—never a fun thing.

In certain circumstances, the lack of an appraisal could prolong or worsen family disputes over inheritances or shared property.

Finally, not having an item appraised could result in missed value when selling.

What a Professional Appraisal Actually Provides

Appraisers trained to provide USPAP-compliant appraisals are committed to the highest levels of professionalism. When you have an appraisal done by such an appraiser, you can count on getting objectivity, defensibility, market context, and documentation to support the valuation determination.

Generally, such an appraisal will include a written report that you can then share with your lawyer, accountant, insurance broker, the IRS, or other professionals involved.

Appraisers can also, in advance of delivering a final report, help to manage expectations. For example, often clients have done some online research of their own. However, it can be all too easy to confuse prices with values. An appraiser can help to explain that asking prices do not necessarily correspond to actual value. Similarly, emotional attachment to an item can result in unwarranted expectations of market worth. An appraiser can address these circumstances and others like them.

Remember, an appraisal is usually appropriate if:

• The item or group of items may be worth several thousand dollars or more.

• The value affects taxes, insurance, or legal distribution.

• Multiple parties rely on accurate values.

• You want a defensible, written opinion rather than an estimate.

  
  

Informed Decisions Reduce Regret

When making decisions about the disposition of your personal property, having better information upfront can reduce the chance of regret later on. Not every circumstance calls for an appraisal. But for those that do, a reliable, professional statement of value can make a big difference in reducing stress and providing peace of mind.

If you’re unsure whether your situation warrants an appraisal, a brief consultation can often clarify that before any formal work begins. In many cases, determining whether an appraisal is needed is the most valuable first step.

Conclusion: The Value of Appraisals

In conclusion, understanding the importance of appraisals can save you from potential pitfalls. Whether you are dealing with inheritance, insurance, or simply decluttering, having a professional appraisal can provide clarity. It helps you make informed decisions about your belongings. This can lead to peace of mind and reduce the chances of regret in the future. Don't hesitate to seek professional advice when in doubt. Your belongings deserve the right valuation.