When determining the value of an individual’s estate, the net asset value must be attained. The first step in this process is to create an inventory of an individual’s assets. Government officials will locate and document all of an individual’s assets, including any real estate, monetary funds, and personal belongings that he/she owns.
Asset pricing will then occur. The fair market value of each of these items must be determined. This refers to the price that these assets would be sold for and purchased for, without any intervention from the consumer or the individual selling the item. Any offshore assets, such as real estate or bank accounts in foreign countries, will also be included in an asset inventory. The value of all of an individual’s assets will determine the value of his/her estate.
It is important to note that the value of an individual’s estate is not necessarily the net asset value of the estate. An individual’s estate could be valued very high, however, after deductions from the estate, the net asset value may decrease significantly. It is possible for certain deductions to be made from the value of an individual’s estate.
For example, if an individual dies with an extensive of debt, including credit card debt, this debt may be paid by taking money from is/her estate and providing it to lenders. If a portion of the estate is used to repay an individual’s debts, the net value of his/her estate will be much lower than the initial value of his/her estate. Therefore, determining the net asset value of an estate can be more difficult than adding the values obtained through asset pricing.