An Appraiser's View

As an IRS qualified expert in both current and retrospective real estate appraisals for estate valuation, I get a lot of phone calls and messages this time of year from people who have lost someone and are overwhelmed with navigating the legal requirements as an heir and/or executor of an estate. Below is the answer to some of the questions I get. 

Does the IRS require a Date of Death Appraisal?

YES. The IRS may require two different values of the real estate. One based on the date of property acquisition, the other based on the date the owner passed. The date the property was acquired can be the date of purchase or the date the property was put into a trust. If the former, the value is normally the purchase price, if the latter, then an appraisal should have been done at the time of creating the trust, otherwise you will need a retrospective appraisal to establish the value. See a tax professional for clarification.  

* To calculate the gross estate for tax purposes
* To establish the stepped-up basis for heirs
* To avoid disputes with the IRS
* To ensure the estate pays the correct amount of taxes

What if the estate is in probate? 
The state of California requires a date of death appraisal in probate court when real estate is valued at more than $50,000 to ensure that the court has an accurate list and valuation of all the assets in the estate. They do not provide valuation for when the property was acquired by the deceased. If required for tax purposes, you will need to obtain that valuation separately.  

Who can perform a date of death appraisal? 
Any IRS qualified appraiser can perform a date of death appraisal provided they are competent in the market and do not have an interest in the outcome of the value. However, If the estate is in probate, the only one who can appraise the property is a probate referee. But don't worry, they are still required to be accurate and thorough.
That said, probate can be both expensive and lengthy, often taking two or more years to settle an estate. Most legal and financial advisors suggest you take steps now to avoid probate. 

Does having a will avoid probate court?
No.  
A will alone will not avoid probate court. Per legal experts, court information, and (ouch) personal experience, the ways to avoid probate are 
*Joint ownership with right of survivorship: When property is jointly owned with another person and the deed specifies "right of survivorship," the surviving owner automatically inherits the deceased owner's share without going through probate. 
*Living trusts: If the majority of an individual's assets are held within a properly established living trust, the trustee can distribute the assets according to the trust document without needing to go through probate court. 
*Small estate value: California has a $50,000 threshold for small estates where the total value of the deceased person's assets is low enough to avoid formal probate procedures. 
*Avoid probate for non real estate assets with Beneficiary designations:
Assets like life insurance policies, retirement accounts, and some bank accounts can be set up with named beneficiaries, allowing them to receive the funds directly upon the owner's death, bypassing probate. 

Important note on trusts. There is no recorded record of the trust other than the paper it is on. If that paper is lost, the property will end up in probate court anyway. The attorney is required to keep it on file, but only until they retire or go out of business. If you are a beneficiary in the trust, keep a notarized copy in your files!  

Does it matter if I wait to get the appraisal? 
Yes.
The longer you wait, the more difficult it will be for the appraiser to provide a fair market value opinion of the home due to changes in the market, changes in the condition of the home, and changes to external influences on the property. The more complex the assignment, the more the appraiser will need to charge to account for the time required. If you THINK you might need an appraisal, call me today (916) 303-0960 and I will walk you through the process without any pressure so you can make a better decision. 

Am I an IRS qualified appraiser? 
Yes!
With over 23 years of providing fair market values, the completion of numerous courses on estate valuations, and extensive experience with appraising multiple properties for one estate, vacant land, two to four unit, large parcel properties, condominiums, and single family residences with values ranging from $24,000 to $14,000,000, you might say I am an expert. 

I hope the information in this blog helps you in two ways. 1. Providing some clarity and peace of mind while you are grieving, and 2. Nudging you to put your estate in a trust so your loved ones can avoid the mess you are dealing with.   

If you need help setting up a trust or preparing taxes, I use and have been more than happy with Richard Jones at HBW Advisors in Roseville, CA. 

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