Estate Appraisals
We specialize in retrospective estate appraisals to determine Fair Market Value as of the date of death.
Estate Appraisals
Settling an estate and filing an estate tax return usually requires an appraiser to establish an opinion of “Fair Market Value” (FMV) for the residence involved. Often, the date of death (effective date of the appraisal) differs from the date of the inspection. We appraisers are familiar with the procedures and requirements necessary to perform a retrospective forensic real estate estate appraisal with an effective date and a “Fair Market Value” opinion matching the date of death.
Who does the appraisals?
If there is no estate tax liability, usually because of the marital deduction or the unified credit, often a letter from a real estate agent is used. However, the executor has to have enough nerve to ask for a ‘free’ market analysis.
If an audit is anticipated, many attorneys and accountants prefer to use a licensed or certified appraiser, plus possibly a second opinion by another appraiser or a real estate agent. An appraiser with superior credentials and methodology and local experience is preferred as the tax court and circuit courts often look to the best appraisal done by the most competent appraiser rather than “splitting the difference
Who does the appraisals?
If there is no estate tax liability, usually because of the marital deduction or the unified credit, often a letter from a real estate agent is used. However, the executor has to have enough nerve to ask for a ‘free’ market analysis.
If an audit is anticipated, many attorneys and accountants prefer to use a licensed or certified appraiser, plus possibly a second opinion by another appraiser or a real estate agent. An appraiser with superior credentials and methodology and local experience is preferred as the tax court and circuit courts often look to the best appraisal done by the most competent appraiser rather than “splitting the difference
When Are Appraisals Needed for Estate Settlement
Fair Market Value of Property
Accurate appraisals establish the current market value of real estate, personal property, and other valuable assets. This valuation is essential to ensure fair and equitable distribution among heirs and beneficiaries during the estate settlement process.
Probate Process
Requirement
Courts often require formal appraisals to verify the value of the estate’s assets before granting probate. These appraisals provide an objective assessment that helps prevent disputes among heirs and beneficiaries. This process also ensures that the estate complies with legal and tax requirements.
Sale or Transfer of Assets
Estate appraisals are needed to calculate estate taxes and file accurate returns. Accurate valuations ensure fair taxation and minimize liabilities. Proper appraisals prevent costly penalties and audits from tax authorities. Well-documented appraisals also provide legal protection and clarity for executors managing the estate.
Sale or Transfer of Assets
When estate assets such as real estate or valuable personal property are sold or transferred to heirs, an appraisal provides a fair basis for pricing, protecting both sellers and buyers.
Dispute Resolution Beneficiaries
In cases where heirs disagree on the value or division of assets, a professional appraisal offers an unbiased assessment that can facilitate resolution.
Insurance and Asset Protection
Accurate valuations ensure that estate assets are properly insured until the settlement is complete.
When Are Appraisals Needed for Estate Settlement?
1.Estate
- Sale to a relative
- Partitioning an estate among the heirs or beneficiaries
- Sale to a non-relative
- Prior to listing the home for sale
- Partial interest (typically income property)
- Federal or state estate
- tax returns
- Gifts and gift trusts
- Determining the basis for capital gains tax
✅ 2. Who needs the appraisals?
- Registering for a driving course.
- Completing the SAAQ theoretical exam.
For Gifts
Whenever a gift is given as part of an estate, it is important to determine its accurate value for tax and legal purposes. Gifts are often given in cash, but they can also include assets such as an undivided interest in real estate or shares in family businesses. Correct valuation ensures proper tax reporting and helps avoid future disputes.
Currently, an individual can give up to $10,000 per year to each child as a non-taxable gift under the annual gift tax exclusion. While many families use this to give cash gifts, they can also establish a family limited partnership to make these $10,000 annual gifts by transferring interests in real estate or other valuable assets. This strategy helps in managing wealth and can also reduce estate and gift tax liabilities.
Accurately valuing and documenting these gifts is essential to maintain compliance with tax laws and to ensure a smooth estate settlement process.
For Living trusts
Living trusts are a popular way to avoid probate fees and the lengthy probate process by allowing assets to pass directly to beneficiaries without court involvement. This helps families save time and legal expenses during estate settlement. However, while they simplify estate transfer, living trusts do not reduce estate taxes.
Originally used mostly by wealthy individuals, living trusts have become increasingly common among middle-class families as more people seek to avoid probate hassles. Typically, no formal appraisal is done when a living trust is created. Whether an appraisal is needed depends on the type and value of assets involved and any tax considerations. In some cases, an appraisal may be required later, especially for real estate or high-value property in the trust. Proper valuation ensures accurate estate reporting and can prevent disputes among beneficiaries.
Fractional interests
If a decedent owns a fractional interest in real property—usually less than 50%—that portion must be valued separately. The value of such an interest is generally less than its proportional share because fractional interests are harder to sell and have a limited market.
For example, if the decedent owns 10% of a shopping center worth $1,000,000, the straightforward share would be $100,000. However, due to limited marketability and lack of control, the actual value of this 10% interest is usually lower. Buyers are often hesitant because they do not have full authority over the property and face challenges in managing or selling their portion. These factors result in a marketability discount applied during appraisal. Proper valuation is important to ensure fair estate settlement and accurate tax reporting.
Federal estate (death) taxes
If the fair market value of a decedent’s gross estate exceeds $600,000 for an individual (note that this exemption limit has increased annually since 1999), the estate is required to file an estate tax return. This filing often triggers the need for one or more professional appraisals for each property included in the estate to accurately report asset values. According to attorneys familiar with estate tax matters, these estate tax returns are subject to a very high audit rate by tax authorities, which places significant importance on the accuracy and completeness of property valuations.
Improper or undervalued appraisals can result in severe penalties, including fines and additional taxes, making it crucial to obtain precise and well-documented appraisals. In community property states such as California, the valuation process can be even more complex due to the shared ownership nature of marital assets, which may affect how property values are reported and taxed. Therefore, careful appraisal and legal guidance are essential to ensure compliance and minimize risks during the estate settlement process.