Prior changes in market conditions make it difficult to estimate the current value of a home at the time of death of its owner. Executors or administrators of estates are likely to need a professional appraisal of a house to determine how to equitably distribute assets of the deceased.
An estate entity is created automatically upon the death of an individual. The assets of a typical estate include a personal residence, financial accounts, and a wide array of various items. The current value of the house may differ greatly from the amount originally paid by the decedent.
Differing asset valuations
There are often multiple heirs to an estate. To arrive at an equitable distribution for all heirs, a fair valuation of the assets is necessary. If a house is included in the estate, a professional appraisal may be necessary to provide a precise valuation to the new owner for tax purposes.
An asset owned by an individual is valued at an amount referred to as its basis. The basis of inherited property is generally its fair market value on the date of the decedent's death. The beneficiary needs a new, accurate basis figure for the inherited home.
The appraisal process
It may take some time after the death of a loved one to begin focusing on the details of administering an estate. As the executor or administrator, you may choose to value all assets at an alternative date six months after the death. The many variables of a real estate appraisal may cause the valuation to differ somewhat after six months.
A home appraisal entails a physical inspection of the property combined with market analysis. If there is no current occupant in the house, the contents and furnishings can be arranged to provide convenient access to all areas for inspection. Make a list of any appliances that are to be inherited so that they can be excluded from the appraisal.
The federal estate tax
In addition to providing for a fair distribution of assets, an appraisal may be needed for larger estates to determine if a federal estate tax return is required. The threshold requirement for the federal estate tax is quite high, but a real estate appraisal is essential if an estate tax return is required.
A minority of states have an inheritance tax. Executors or administrators in those states may need an appraisal to determine if any state inheritance tax is due, even if no federal return is required. Contact a property appraiser like East Coastal Appraisal Services for further advice on obtaining a home appraisal for estate administration purposes.