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

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 there is a gift, the value needs to be determined. $10,000 per year can be given to each child as a non-taxable gift. The gifts are usually cash, but can be an undivided interest in real estate. A family limited partnership can be set up to make the $10,000 per year gifts.

For Living trusts

These are a popular method of avoiding probate fees and hassles, but don't help avoid estate taxes. Living trusts were formerly used mostly by the wealthy, but have now filtered down to the middle class, and are becoming more popular. Typically no appraisal is done when the trust is established. Whether or not an appraisal is needed

Fractional interests

If a decedent has a fractional interest in real property, typically less than 50% interest, that portion must be valued. The value of the interest is usually less than its pro-rata share. For example, the decedent owns a 10% interest in a shopping center worth $1,000,000. The value of the interest is less than $100,000, as they are very hard to sell, with a limited market.

Federal estate (death) taxes

If the fair market value of the gross estate is over $600,000 (one person) (1999 NOTE: this limit increases every year), an estate tax return must be filed. Attorneys we spoke with said this often triggers one or more appraisals for each property, as these returns have a very high audit rate. Improper valuations can have high penalties. In community property states like California.

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