Estate Appraisals and Administration – Lake County Record-Bee

Appraisals are often an important and expensive part of administering a deceased’s estate, whether it is an estate or a trust. Appraisals provide the value of assets as of the date of death used to calculate probate administration fees (for the administrator and their attorney) and to prepare federal and state tax and estate returns, if applicable.

In a California probate, the superior court in each county appoints a licensed appraiser as a probate arbitrator (an officer of the court) to value the assets listed on the deceased’s inventory and appraisal. Assets that require appraisal include real estate, stocks and bonds, and tangible personal property. In fact, anything other than cash on hand or cash on deposit is assessed by the appointed probate arbitrator.

Tangible personal property often requires additional appraiser(s) who know how to appraise valuable jewelry, artwork, firearms, and collectibles (e.g., stamps and coins) among others asset classes. A probate arbitrator will assess unpaid real estate, vehicles, stocks and bonds, and promissory notes. Any separate appraisal of tangible personal property will be incorporated by reference into the inventory and appraisal signed by the probate arbitrator.

In California, a probate arbitrator is not required to make appraisals in a private trust administration, but can—and often does—appraise assets listed on the trust’s inventory. Other qualified assessors may also be used. In California, the California Bureau of Real Estate Appraisers issues three different levels of appraisal licenses. The California Residential Appraiser License allows an appraiser to appraise residential real estate only, subject to value limits. The highest license is that of a Chartered General Appraiser who can appraise all types of properties – residential or commercial – with no limit on value.

Appraisal values ​​at the date of death are used for income tax purposes to calculate capital gains on the sale of assets once owned by a deceased (excluding tax-deferred retirement assets , such as Individual Retirement Accounts). For example, if a deceased’s home is valued at $300,000 and sells for $310,000, then there is a $10,000 capital gain (which is also reduced by the expenses associated with the sale). Under current federal law, any appreciation in lifetime value or reduction in purchase price basis due to lifetime tax depreciation is eliminated if the asset is held at death, because the basis is adjusted to the date of the value of death.

Sometimes appraisals are used to value assets for distribution. For example, if valuable personal property is to be divided equally according to its value, an appraisal of the value of such property may be desirable or necessary. If the distribution occurs near the date of death, the parties may agree to use the date of death valuations.

Appraisals are also used for the valuation of assets for lifetime gifting purposes that exceed the $15,000 annual federal gift tax exclusion (IRS 709 returns) and for tax preparation purposes. federal income (IRS 706 returns). Such appraisals often create a tax controversy with the IRS due to appraisal discounts granted in the appraisal which reduce gift or estate taxes owed. However, the Unified Federal Estate and Gift Tax Credit allows giving $12,060,000 (2022) during one’s life and death (combined) without incurring applicable federal estate (death) tax. or donations (for life).

Besides assessments, other assessment tools exist for other purposes. A valuation should not be confused with the less comprehensive, but also less expensive, “Broker’s Price Opinion” (“BPO”) which can be used when a value is needed to sell, refinance or insure real estate, among other things. possible situations. BPOs, however, are not sufficient for income or estate and gift tax assessment purposes.

The foregoing brief discussion of valuations is neither legal nor valuation advice. Anyone facing these issues should seek the assistance of an attorney or a qualified appraiser, or both, as the case may be.

Dennis A. Fordham, attorney, is a state bar certified specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, CA. He can be reached at [email protected] and 707-263-3235.

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