Appraisals are extremely important for proper trust and estate valuation; however there are several types of appraisals and that may present a problem. In the jewelry industry, typical appraisals are written for insurance purposes for the full retail replacement in the event of theft, loss or damage. Although this is an important document while the item is being enjoyed, it does not represent the current, actual market value of the item.
As part of an estate or trust which includes jewelry, coins or other hard-to-value assets a current, actual market valuation is an absolute necessity. This type of valuation is what the item can actually be sold for, and can only be accurately provided by a company that actually buys fine diamonds, estate jewelry, luxury watches, coins, etc. and not by a middle man broker or retail jeweler.
Although there are general guidelines, there are no actual laws governing the value placed on jewelry for appraisals. Retail appraisals can range from 2-5 times the true market value of diamonds, fine jewelry and luxury watches, and which is why a current, cash value market valuation is so important. Using a retail replacement appraisal may lead to negative tax consequences and improper distributions during the liquidation of assets from a trust or estate.
Diamonds, along with nearly everything else in today’s economy have experienced substantial price swings over the last 8 years. As fiduciaries may be required to conduct annual reviews of assets held in trust, it may be advisable to check the type and accuray of appraisals your company has on these items.
Hamilton York Estate Buyers provides our clients with current, actual market appraisals and valuations. Our appraisals ensure that these assets are properly valued for current market conditions.For new customers we offer a free appraisal analysis to ensure their accuracy in today’s market. For details simply call 877.560.7070 or email to [email protected] We are providing an excerpt from the Federal Government Office of the Comptroller of the Currency’s handbook which outlines the requirements for maintaining current valuations of “Unique and Hard-to-Value Assets” which applies to gemstones, jewelry and watches. Comptroller’s Handbook Unique and Hard-to-Value Assets p. 40-41
Tangible Assets and Collectibles
Tangible assets include household furnishings and automobiles. Collectibles include works of art, antiques, stamps, coins and bullion, gemstones, and other miscellaneous assets. These assets are generally found in estates and personal trusts. There are restrictions on collectibles in IRAs and employee benefit accounts. The governing instrument should authorize retention and possible purchase of tangible assets. Appraisals should be obtained upon receipt of such assets and valuations must be updated periodically. Depending on the terms of the governing instrument and the specific needs of the trust, tangible assets and collectibles are usually either distributed in kind to designated beneficiaries or are sold to provide liquidity. Bank fiduciaries must provide strong internal controls, appropriate storage, adequate insurance, and accurate values for these physical assets.
Collectibles such as rare stamps and coins should be authenticated by experts. Diamonds and other gemstones require certificates of authenticity from gemologists or other expert appraisers. It is essential that such assets be maintained under dual control and be protected from theft, substitution, and physical damage. Because of their unique nature, these assets may be irreplaceable. The bank should be aware of specific requirements for storage of certain types of assets, such as furs, firearms, or liquor. For some types of tangible assets and collectibles, appropriate off-site storage should be considered. With some notable exceptions, tangible assets may be difficult to liquidate. Before accepting unusually rare or highly valuable collectibles, bank fiduciaries should consider whether it is appropriate to verify the authenticity and provenance of the asset and whether there are applicable laws or regulations that restrict the disposition of the asset. Federal and state laws, the Federal Bureau of Investigation’s Art Crime Team, and numerous other domestic and foreign law enforcement groups have been established to assist in locating, identifying, and securing the return of art, artifacts, and cultural properties to their rightful owners.For the full report for Hard-to-Value Assets from the Office of the Comptroller of the Currency please click on the following link. http://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/Unique_and_Hard-to-Value_Asset_Booklet.pdf
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