When most of us pass away, our estates will have little difficulty determining how much our personal possessions are worth. This is true for both the very poor and the very rich.
If we own a necklace, even one with several diamonds and rare jewels, determining how much that necklace is worth is not very challenging. Appraisers and jewelers can determine the market price of the necklace in short order and that price is normally fairly reliable.
On the other hand, what if the necklace was not owned by just anyone? What if it was owned by Audrey Hepburn?
In that case, it is much more difficult to determine how much the necklace is worth, as Bloomberg explained in "How Do You Put a Price on Audrey Hepburn's Personal Treasures?"
In a few months, many of Hepburn's personal belongings will go up for auction at Christie's. That means the auction house must estimate how much each individual item is worth to a willing buyer. Doing that is more difficult than putting a market price on the item itself.
Appraisers must instead estimate how much of a premium someone may be willing to pay because of who owned the items. That is not an easy task.
The premium people will pay is different depending on the items and often depends on how closely associated the celebrity was to the item and how much it meant personally to the celebrity.
This makes things difficult for celebrity estate administrators, who must determine what personal items are worth for estate tax purposes.
A true value cannot be determined, until the items are actually auctioned off.
If too high of an estimate is made, then the estate might pay more in estate taxes than necessary. If too low of an estimate is made, then the IRS is unlikely to be very happy.
Reference: Bloomberg (June 15, 2017) "How Do You Put a Price on Audrey Hepburn's Personal Treasures?"