Equipment Appraisal Blog | Understanding Machinery Appraisals

You have spent years building up your business, invested wisely, accounted for risk, and sacrificed a lot to build your company into what it is today. You have groomed the next generation of your family and employees to one day take over the legacy you have created.

If you own a significant amount of machinery & equipment as part of your business, have you accounted for gift or estate taxes in your planning? With the potential liability of these taxes, failing to plan for them can leave your legacy open to unnecessary costs. You can avoid this pitfall by obtaining an accredited machinery & equipment appraisal with signed certification that attests to an objective, fair opinion of value.

Whether you are planning on handing down the business or just need to update the current value of your tangible machinery assets for internal or external purposes, a documented appraisal report will satisfy several needs. It can assist in limiting any disputes in value by those taking over the business, where one family member, partner, or vested employee thinks they are getting more or less than another. If your estate and it’s associated company is being divided up between several people, an accredited equipment appraisal will help determine how all the assets can be equally divided. If you are planning on using a living trust, it also has the advantage of keeping your loved ones out of probate and will keep your accounting and wealth private.

Making Arrangements for Estate and Gift Taxes

When you have a supportable, independent equipment appraisal report in hand, you can then estimate how much these burdensome taxes may be and make allowances for them either through life insurance, business insurance, or by leaving a certain amount of equity available to cover these estate costs.

If you are thinking of estimating these values internally by simply looking for similar equipment online or finding a broker, auctioneer, or other unaccredited third parties to estimate value, you risk not having an objective, reliable report. This may cause concern by those auditing your business for estate tax purposes.

Make sure you employ accredited valuation experts who are members of the American Society of Appraisers (ASA). This ensures they follow the protocols of providing objective, supportable reports that will hold up in any business situation.

You've spent years building up your business. You've invested wisely, accounted for possible risks and taken the time to build your business into what it is today. You've even groomed the next generation to take over your legacy when the time comes. But have you accounted for gift or estate taxes in your planning? With the high cost of these taxes, failing to plan for them in your estate planning can leave your legacy open to risk. Here's how you can avoid this pitfall through proper, certified equipment appraisals:

Estate Taxes: Knowing How to Approach Equipment Value Protects Your Legacy

Documenting Machine Values

Whether you're planning on passing on a business or just have some good equipment, documenting your equipment values through a machinery valuation can meet several needs at once. It can help prevent fighting by those left behind, with the impression that one family member, partner or friend is getting more than another. If your estate is being divided up between a certain number of people, with equipment left to one and cash to another, it helps determine how much cash the equipment is worth. If you're planning on using a living trust, it also has the advantage of keeping your loved ones out of probate and keeps your accounting and wealth private.

Making Arrangements for Estate and Gift Taxes

Estate and gift taxes can be very heavy, especially if you're passing a large business on to the next generation. By having a current machine valuation performed, you can determine a more accurate picture of what your business assets and equity actually are. When you do this, you can then estimate how much these burdensome taxes may be and make allowances for them either in your life insurance, your business insurance or by leaving a certain amount of equity available to cover these needs. If you are planning on making allowances for these items, you'll want to account for what estate taxes may remove from these funding sources as well.

What Kind of Machinery Valuation?

If you're thinking of simply looking for similar equipment online or finding someone who sells used equipment to give you a general estimate of your machinery's value, we would strongly encourage you to avoid this approach. We've had to try to help families who have suffered a loss whose loved one has gone this route, just to discover that the machinery valuation that was provided was completely inaccurate, whether it's because they need to sell the equipment quickly to pay estate taxes, because the machinery will require extensive work and expense to remove or because the individual who prepared the estimate didn't really understand what they were looking at. Using a certified equipment appraiser helps ensure that the values you're working from are accurate, because the appraiser is required to work within a particular set of constraints and specific methodologies that are approved and often used in probate court. 

By keeping an eye on your equipment values and knowing what to expect in terms of estate taxes, you can rest assured that your legacy will be passed to the next generation as you intended.