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Avoid Conflict When Valuing Property Partnerships

Bigstock-Handshake-90113261Property partnerships end for a variety of reasons. Ideally, the ending is wanted and agreed upon, financially and emotionally enriching all parties. But when things go bad, stuff hits the fan. Likely circumstances are a broken relationship, a property investing business partnership that went south or siblings who shared property their parents left as part of an estate. A fourth category occurs when one partner in an amicable relationship wants to cash out and the other wants to keep the property and they don't agree on the property's value.

As The Orange County (CA) Register explains in "Splitting up property is hard to do," being level-headed, open-minded, and empathetic can really improve your odds of avoiding protracted litigation to force a sale of the property. The process is termed a partition action.

If you are really interested in getting to a fair property value for all concerned, there's a formula for the situation where one party wants to purchase the other party's share and keep the property. In that case, each party chooses one appraiser, and each conducts his or her own appraisals. Then the two appraisers agree on a third appraiser to do another appraisal. The final value is an average of the two appraised values closest to each other.

Here's an example of how this works. Partner A's appraiser determines that the value is $650,000, and Partner B's appraiser values the property at $745,000. Then, the mutually-chosen appraiser conducts her appraisal and determines that the value is $690,000. The closest value to the third appraiser's estimate is by Partner A's appraiser: $650,000. The average of the two is $670,000. Party B's appraisal is thrown out.

This type of methodology makes both appraisers reasonable so that their value isn't the one that's knocked out.

A qualified estate planning attorney can help shepherd this process and refer you to appraisers as needed.

For more information about estate planning, please visit my estate planning website.

Reference: Orange County (CA) Register (November 7, 2015) "Splitting up property is hard to do"

 

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Why the Value of James Brown’s Estate Matters

Bigstock-NEW-YORK-CITY-USA--SEPTEMBER-99713237 (1)Litigation over the estate of James Brown has been ongoing for nearly a decade. The issue of whether Brown was married at the time of his death has been decided, but the very important issue over how much his estate is worth has yet to be determined.

Have you been following the strange tale that is the James Brown estate?

As you may recall, his estate plan called for his music empire to be put into a charitable trust and used to help needy students. Nevertheless, despite the fact that his will contained a no-contest clause that stated that anyone who contested the will could receive nothing, the will has been the source of ongoing challenges since the musician passed away in 2006.

At one point a settlement was brokered by none other than South Carolina’s Attorney General Henry McMaster. However, that settlement was ultimately rejected by the South Carolina Supreme Court.

One of the largest questions remaining is how much is the music empire worth? Documents filed by the current trustee with the IRS valued the estate at $4.7 million, while earlier trustees valued the estate at $100 million. The full details of the dispute were reported by the Herald Independent in “The $95 million question: What's at stake in Brown estate battle?

The dispute matters greatly because charitable foundations are required to distribute at least 5% of their value to charity every year per IRS rules. Thus, there is a very large discrepancy in the total number of students that would be helped each year by the trust depending upon which valuation of the music empire is ultimately accepted by the courts.

For more information about estate planning, please visit my estate planning website.

Reference: Herald Independent (September 4, 2015) “The $95 million question: What's at stake in Brown estate battle?

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