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Putting the correct value on a family business

One of the most important jobs the executor of a will has is to place values on the different assets of the estate. In many cases, this is relatively straightforward. For instance, with respect to a bank account or other liquid asset, it may just be a matter of figuring out the account's balance at the time of death. In other cases, such as in the case of a car, the process may be a little harder, but there will usually be other similar vehicles one can compare the car to to guess the vehicle's value.

Such is not the case with respect to a small business. While some comparison is possible, every business is unique and, without a set stock price or a sale of the business, it can be hard to determine how much a decedent's share in their business is worth.

Moreover, the stakes are often high in these sorts of cases, as many New Jersey residents have the bulk of their wealth wrapped up in their family business. If in the process of probate and estate administration the value of the business gets mis-stated, it could spell tax consequences as well as probate problems if the terms of the will do not get accurately carried out.

Putting a value on a family business is usually best handled by an accountant or expert business appraiser, both of whom frequently work with New Jersey estate and probate attorneys. However, there are some general principles one can keep in mind.

The key is that most of the value of a business is not tied up in its net assets. Rather, a business can be compared to another stream of income, much like an annuity. The trick is to figure out how much one should pay now for the right to receive money from the business in future years.

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