When an estate has a transfer of ownership due to death or inheritance, a home owner will need to eventually hire a real estate appraiser in order to show the IRS what the reasonable worth of the estate is. So the owner or heir will obtain a “Date of Death” appraisal, which is an appraised value as of the date of the death of the deceased owner. These appraisals are very commonly ordered within several months of the death of a loved one, but there are three things to consider before ordering the appraisal:
1) Timeline: If your loved one passed away recently and you need to file your taxes very soon, it makes good sense to obtain an appraisal in a timely manner so you can communicate well with the IRS. In other words, if your loved one passed away within six months before you file your taxes, it would likely be prudent to order the “Date of Death” (DOD) appraisal within that timeframe. This is the most common scenario I encounter for the bulk of my estate appraisal workload.
2) Alternative Valuation Date: I mentioned the Date of Death (DOD) appraisal already, but the IRS has also made allowances for a home owner to obtain an Alternative Valuation Date (AVD) six months after the date of death of the owner. Basically, if the market has declined in value after six months since the date of death, you can use the appraised value six months later to show your estate has decreased in value over time due to market circumstances. In this option you would need two appraisals, both a DOD and AVD. If the market has been hit hard, this could be a huge advantage for you for tax purposes. Granted, you would pay for two appraisals (use the same appaiser), but the savings in light of a large decline should far outweigh the cost of the appraisals.
3) CPA / Attorney Advice: Make sure to carefully weigh your options and the implications of using a DOD or AVD appraisal. You should definitely consult with your CPA and/or attorney to talk through which options would be most beneficial for you depending on your plans for the property and the implications for taxation based on using a DOD or AVD.
I am familiar with the estate planning appraisal process, IRS guidelines for appraisals, and I also run an estate appraisal website. Please contact me with any questions. I am always very glad to help answer questions and meet a need for property owners in what is often a difficult time of life.
If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.
Does a wide need to do a DOD appraisal if the home is in a trust?
Does a recent widow need a DO D appraisal if the home is in a trust?
Ryan Lundquist says
Hi Elizabeth. I am not sure of the technical answer to be honest. A CPA or tax attorney is likely the best party to answer that question since that is their expertise. I am on the other side of things, so I simply appraise a property when it is ordered. However, when an owner or heir does call, I very often direct them to their CPA to be sure an appraisal is needed. I don’t want heirs and owners to spend money needlessly on appraisals. If there is anything I can do for you, please call or email me.
Can a DOD appraisal be performed by a qualified family member? Example, my mother passes and the stepfather has a brother who is an appraiser.
Could or would this be a conflict of interest?
Ryan Lundquist says
Hi Frederick. Thanks for asking. I’m not aware of any IRS rules that would disallow a family member from doing the appraisal, though the accusation of having a conflict of interest could be lurking at the door too. In a case like this an appraiser would have to be extra sure he can be objective. Personally I would not do the appraisal because I aim to avoid scenarios with temptation and scenarios where there might be an issue with the family down the road. Just the other day a neighbor called wanting a divorce appraisal and I referred the neighbor to a colleague instead. It’s just not worth it on my end. I’d very likely do the same thing for family, though I think there is room for different opinions from other appraisers. But for me though I know what I would do.