What's The Difference Between Insurance And Estate Appraisals?

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Antiques Roadshow fans may be accustomed to hearing two prices quoted during the televised appraisals, one "for insurance purposes", and another "at auction". When considering the value of your engagement rings, diamonds, and other fine jewelry, it is important to understand the difference between an insurance appraisal and an estate appraisal.

If your engagement ring is stolen or lost, how much will it cost to replace it? Insurance appraisals estimate the replacement value of an item. To establish the value of your items, jewelers must first correctly identify and evaluate its components. The materials, workmanship, and condition are all taken into consideration. Once a value is assigned, the appraiser witnesses the appraisal document, which enables the appraiser to attest in a court of law as to the value and condition of your jewelry at a certain point in time. This valuation is usually considered valid for several years.

Beth Szescila, who appears on Antiques Roadshow, points out, "What happens on Antiques Roadshow is not actually an appraisal. It's an educated guess based on the appraiser's years of experience." Real appraisers charge a fee for their service and some jewelry stores provide "while you wait" evaluations. If you'd rather, appointments in your home are also available. You will be provided with copies of the verified appraisal for yourself and your insurance company.

Receiving an accurate replacement value of your jewelry is extremely important. An inflated price means higher insurance premiums, but will not guarantee a bigger check in case of loss. Many insurance companies will themselves arrange to have your jewelry replaced, rather than simply hand you a check. Another mistaken idea is that an insurance appraisal might be used by the Internal Revenue Service in taxing your estate. An entirely different type of appraisal is used for this purpose.

An estate appraisal is a legal document used in probate of property named in a will. Estate appraisals establish the Fair Market Value of your fine jewelry. As this appraisal must be included in your estate, the definition for this valuation is determined by Federal regulations.

According to the Internal Revenue Service, Fair Market Value is the price that property would sell for on the open market between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. An estate appraiser must follow strict legal requirements which may vary from state to state.

It is recommended that insurance records be updated every few years to reflect the changing values of jewelry. Estate appraisals are usually not completed until probate, although in some cases it may be advantageous to have them earlier, such as in the case of trusts, where by establishing a higher tax basis now, the tax liability for beneficiaries may be less at the time of distribution.
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