Partial interest for an estate.

[jeremyd4]

I have been asked to appraise a beach home for an estate.The father
had a 48% interest, the three children have the remainder.This will be for the IRS. ( the 48 %). Determining fee simple market value isn't a problem, but I'm a little shakey on discounting or adjusting the 48%because of the partial interest. Thanks

 

[Frederick R. Ruffell]

Sum of the parts does not equal the whole as there are costs associated with "cashing out" one or more of the entities that hold an interest. I have little experiance with partial interest but this much I remember from some CE courses.

 

[Ray Ohler]

Partial interests can be fairly simple and there are a lot of good books on the subject. BUT, I have one I was asked to quote a fee on and it probably is going to be VERY expensive. Woman died in 8/98, left the property to six children (equal %). One son (married) died in 11/98, his interest went to the other five. Second son (unmarried) died 1/2002 (he had an undivided 1/5 (20%) interest at that time). The above STILL wouldn't make it impossible to appraise. HOWEVER, throw in the fact that the mother left in her will, a provision for her THREE unmarried sons (one died 1/2002), the right to occupy the property for AS LONG AS THEY WERE UNMARRIED, meaning they very well COULD be life estates. Two are still unmarried and may very well be until they pass on. Now, the IRS isn't the only problem. The one that died in 1/2002 had credit card and other debts of $97,000. They are going to bankrupt his estate (property from '98 to '02 worth somewhere in the 50's). I will have to testify on the appraisal in bankruptcy court. OH, the attorney wants a CHEAP appraisal.

 

[Anonymous]

If you have been asked to appraise the property do it. Let the attorney or accountant decide what they want to do about the partial interest. If they want you to address the partial interest you should pass up the assignment.

 

[jeremyd4]

thank you for your input. I realized after researching I wasn't competent for the partial interest portion of this appraisal and informed the attorneys and accountants of this fact. They said fine, continue with the fee simple part and we'll
take care of the rest. Now I can sleep at night. Bottom line; if you don't feel qualified to handle the assignment, it's much better - and required by USPAP to say so and walk away.