When someone passes away and leaves behind real property, one of the responsibilities that often falls to the estate executor is obtaining a professional appraisal. If you are serving in that role and are unfamiliar with the process, here is what you need to know.
Why an Appraisal Is Needed
Real estate owned by a decedent typically needs to be valued as part of the estate settlement process. This value is used for probate court documentation, equitable distribution among heirs, and establishing a tax basis for the property. An appraisal provides an independent, USPAP-compliant opinion of value that can withstand scrutiny from attorneys, CPAs, and the probate court.
Date of Death Appraisals
In most estate situations, the appraisal needs to reflect the property’s fair market value as of the date the owner passed away — not the current date. This is known as a retrospective or date-of-death appraisal. The appraiser analyzes market data from that specific point in time to develop a supportable opinion of value.
Step-Up in Basis
Common reasons estate appraisals are ordered is to establish a stepped-up cost basis under IRC §1014. When a property is inherited, the heir’s tax basis is generally reset to the fair market value at the date of death, which can significantly reduce capital gains tax exposure if the property is later sold. A qualified appraisal completed by a certified appraiser is typically required to support this basis for tax purposes.
Working With Legal and Tax Professionals
Estate appraisal reports are prepared to meet the documentation standards required for legal and tax purposes. The appraiser can work directly with your estate attorney or CPA if questions arise during the process.
Serving the Upper Peninsula
Estate appraisal services are available throughout Alger, Delta, Dickinson, Marquette, Menominee, and Schoolcraft Counties. If you are an executor, attorney, or CPA handling an estate that includes real property in the Upper Peninsula, feel free to call or email to discuss the assignment.