Navigating the process of settling an estate can be complex and unfamiliar until you find yourself in the midst of it. Appraisals play a crucial role in estate planning, helping to determine the value of items for tax purposes and facilitating the division or gifting of assets. They are also essential for completing the probate process during estate settlement. Settling an estate is something most people don’t know much about until they have to go through the process firsthand, which can be hard, especially for the executor and family members involved. It can also be wasteful, with a high failure rate, stressful, and a potentially massive drain on time and resources that could be put toward other uses. Consequently, it's important to consider whether you want to be beholden to a myriad of day-to-day management challenges ranging from serious to trivial, multiplied over numerous properties. In this case, the expression “work on your business, not in your business” couldn’t be more accurate.

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Consulting with an estate planning attorney or tax advisor can provide clarity on when an appraisal is necessary. Appraisals are instrumental in estate planning, providing valuation for tax purposes and facilitating asset division or gifting. They are also vital for probate completion during estate settlement. Communication with legal and financial entities is crucial, as the results of the estate planning appraisal must be effectively communicated to the courts, the IRS, as well as your attorney and CPA, ensuring that the valuation aligns with legal and tax requirements, facilitating a smooth estate settlement process. Timely and thorough action is essential in settling estate appraisals. Initiating the appraisal process promptly is crucial to ensure comprehensive and timely results that meet your requirements. The appraisal is used to establish a Fair Market Value for the residential property included within the estate. It is typically ordered by a family member or executor of the estate, and may also be ordered by the attorney or accountant involved in the settlement process. A real estate appraisal can be very helpful, and is often necessary, in settling an estate, with key reasons including donations, IRS tax purposes, trust, probate, pre-listing, and estate taxes.

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The purpose of a date of death appraisal is to determine the Fair Market Value or Base Value of real estate as of the owner's passing, which is a crucial aspect of settling estate appraisals. These appraisals are typically completed after the date of death and are often referred to as retrospective or historical appraisals. Although the inspection date may occur later, the effective date of the appraisal is in the past, usually the date of death. Sometimes, a current value appraisal may be ordered simultaneously to determine the value at the time when the title is transferred. If the dates are close enough, only one appraisal may be necessary.

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A date of death appraisal is conducted with specific purposes in mind, such as probate, estate taxes, capital gains tax, or inheritance tax, establishing a base fair market value used for the property's potential future sale. These appraisals are indispensable in ensuring a fair and equitable distribution of assets, safeguarding your interests.

 

Any modifications to the estate since the date of death need to be communicated and considered in the appraisal process. Ideally, properties are preserved with pending scheduled changes for after the estate is officially settled. The appraisal of the properties needs to be performed for the conditions on the date of death. Any alterations change the property’s state at the date of death, adding complexities for arriving at an accurate value calculation. Furthermore, the risk of contestation lingers until the estate is officially settled. For example, the appraisal value could be contested by one party involved or rejected by the court altogether. It is safest to preserve all properties until the estate is settled.

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