Date-of-Death Appraisal: What You Need to Know

When a loved one passes away, there are many legal and financial matters that need to be taken care of. One of the most important ones is the Date-of-Death Appraisal, also known as the estate appraisal or the date of death valuation. This is a process of determining the fair market value of the real estate owned by the deceased person at the time of their death. The Date-of-Death Appraisal is essential for several reasons, such as:

Calculating the estate tax liability
Distributing the inheritance among the beneficiaries
Settling any debts or claims against the estate
Establishing a new basis for capital gains tax purposes

In this article, we will explain what a Date-of-Death Appraisal is, how it is done, and what you need to consider when hiring an appraiser.

What is a Date-of-Death Appraisal?

A Date-of-Death Appraisal is a type of real estate appraisal that estimates the value of a property as of the date of the owner’s death. It is different from a regular appraisal, which reflects the current market conditions and trends. A Date-of-Death Appraisal requires a historical analysis of the market data and comparable sales that occurred around the time of death.

According to the Internal Revenue Service (IRS), the fair market value of an asset is “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

The Date-of-Death Appraisal is used to determine the gross value of the estate, which is then reduced by any applicable deductions and exemptions to arrive at the taxable value of the estate. The estate tax rate depends on the year of death and ranges from 18% to 40%.

The Date-of-Death Appraisal is also used to establish a new basis for the inherited property. The basis is the amount that is used to calculate the capital gains or losses when the property is sold. The new basis is usually equal to the fair market value as of the date of death, which means that any appreciation or depreciation that occurred during the owner’s lifetime is not taxed. This is known as the “step-up in basis” rule.

How is a Date-of-Death Appraisal done?

A Date-of-Death Appraisal is done by a qualified and licensed real estate appraiser who has experience and expertise in performing historical appraisals. The appraiser will inspect the property and collect information about its physical characteristics, condition, features, improvements, and defects. The appraiser will also research and analyze the market data and comparable sales that occurred around the date of death. The appraiser will then apply one or more valuation methods, such as:

The sales comparison approach, which compares the subject property with similar properties that sold near the date of death
The cost approach, which estimates the replacement cost of the property minus depreciation
The income approach, which estimates the income potential of the property based on rents, expenses, vacancy rates, and capitalization rates

The appraiser will then reconcile the results of different methods and arrive at an opinion of value as of the date of death. The appraiser will prepare a written report that documents the appraisal process, methods, data, assumptions, adjustments, and conclusions. The report will also include photographs, maps, charts, graphs, and other supporting evidence.

What do you need to consider when hiring an appraiser?

When hiring an appraiser for a Date-of-Death Appraisal, you need to consider several factors, such as:

Qualifications: The appraiser should be licensed by your state and certified by a reputable appraisal organization, such as [the Appraisal Institute] or [the American Society of Appraisers]. The appraiser should also have specialized training and experience in performing historical appraisals.
Availability: The appraiser should be able to complete the appraisal within a reasonable time frame. The IRS recommends opening probate proceedings within 30 to 90 days from the date of death. The probate court may require an appraisal report as part of the inventory and accounting of the estate.
Fees: The appraiser should charge a reasonable fee for their services. The fee may vary depending on the complexity, size, location, and type of property. The fee may also depend on whether you need an appraisal report or just an appraisal letter. An appraisal report is more detailed and comprehensive than an appraisal letter.
Reputation: The appraiser should have a good reputation in their field and among their clients. You can check their online reviews, testimonials, references, and portfolio. You can also ask for referrals from your attorney, accountant, or other professionals who are involved in the estate administration.

Frequently Asked Questions (FAQs)

What is the difference between a Date-of-Death Appraisal and a regular appraisal?

Why do I need a Date-of-Death Appraisal for my loved one’s estate?

You need a Date-of-Death Appraisal for several reasons, such as:

- Calculating the estate tax liability
- Distributing the inheritance among the beneficiaries
- Settling any debts or claims against the estate
- Establishing a new basis for capital gains tax purposes

How do I find a qualified and licensed appraiser for a Date-of-Death Appraisal?

You can find a qualified and licensed appraiser by checking their online reviews, testimonials, references, and portfolio. You can also ask for referrals from your attorney, accountant, or other professionals who are involved in the estate administration. You should also verify that the appraiser is licensed by your state and certified by a reputable appraisal organization, such as [the Appraisal Institute] or [the American Society of Appraisers].

How much does a Date-of-Death Appraisal cost and how long does it take?

The cost and time of a Date-of-Death Appraisal may vary depending on the complexity, size, location, and type of property. The cost may also depend on whether you need an appraisal report or just an appraisal letter. An appraisal report is more detailed and comprehensive than an appraisal letter.

What do I need to provide to the appraiser for a Date-of-Death Appraisal?

You need to provide the appraiser with the following information and documents for a Date-of-Death Appraisal:

- The date of death of the owner
- The legal description and address of the property
- The deed or title of the property
- The tax bill or assessment of the property
- Any recent improvements or repairs made to the property
- Any leases or rental agreements affecting the property
- Any mortgages or liens on the property

Conclusion

A Date-of-Death Appraisal is a vital step in the estate administration process. It helps to determine the fair market value of the real estate owned by the deceased person at the time of their death. The Date-of-Death Appraisal is used for estate tax purposes, inheritance distribution, debt settlement, and capital gains tax calculation. A Date-of-Death Appraisal should be done by a qualified and licensed real estate appraiser who has experience and expertise in performing historical appraisals. You should consider the appraiser’s qualifications, availability, fees, and reputation when hiring them.

If you need a Date-of-Death Appraisal for your loved one’s estate, contact us today. We are a team of professional and experienced appraisers who can provide you with accurate and reliable appraisals. We have the knowledge and skills to handle any type of property and any date of death. We will work with you to meet your deadlines and expectations. We will also provide you with a clear and concise appraisal report that will satisfy the IRS and the probate court.

We would love to work with you.