Think one appraisal is enough for your estate plan? Think again.

When it comes to estate planning, the need for appraisals often goes beyond just a simple valuation. Estate appraisals at different points in time can be crucial, especially when the estate is complex or involves a lengthy settlement process. 

Here’s a look at two primary appraisal types that may come into play that you need to be aware of:

1. Date of Death (DOD) Appraisal

The Date of Death (DOD) appraisal, also known as a retrospective appraisal, determines the property’s fair market value as of the owner’s date of passing. This valuation is essential for:

• Calculating Estate Taxes: It establishes a basis for tax calculations.
• Setting the Tax Basis for Heirs: Provides a reliable value for heirs.
• Ensuring Fair Asset Distribution: Helps distribute assets according to the decedent’s wishes.

Typically, a DOD appraisal forms the baseline for estate planning, giving a clear snapshot of the property’s value at the time of death.

2. Current Market Value Appraisal

If settling the estate takes an extended period, or if there are plans to sell the property, a second appraisal may be necessary to reflect the property’s current market value. This updated valuation:

• Accounts for Market Changes: Keeps valuations fair despite any real estate market shifts.
• Supports Equitable Transactions: Useful for fair buyouts among heirs or resolving disputes.

A current market appraisal can be essential in cases where heirs want to buy out others or if disputes over property value arise. This up-to-date valuation provides transparency and supports fair resolutions.

Situations That Call for Two Appraisals

Certain estate scenarios require both a Date of Death appraisal and a Current Market Value appraisal to ensure fairness, accuracy, and compliance. Here are common cases where two appraisals are beneficial:

• Extended Settlement Periods: When estates take a long time to resolve, the market may have shifted since the date of death. A current market appraisal ensures decisions are based on today’s value, not outdated information.
• Heir Buyouts or Disputes: If one heir wants to buy out others or if there are disagreements about property value, a current market appraisal provides an objective, updated valuation for equitable solutions.
• IRS and Tax Implications: The IRS allows an alternate valuation date six months after death if this benefits the estate (such as when property values have dropped). This option requires a second appraisal to document the updated value, potentially reducing estate taxes for larger estates.

When a Single Appraisal May Be Enough

While two appraisals are often useful in complex or prolonged settlements, there are situations where a single DOD appraisal will be sufficient:

• Direct Heir Distribution: If the property is passed directly to heirs without a sale, a DOD appraisal is a solid basis for distribution.
• Quick Estate Settlement: When the estate settles shortly after death, the property value typically remains stable.
• No Buyouts or Disputes: In simpler cases with no disagreements, a single DOD appraisal usually meets all legal and tax requirements.

In straightforward cases like these, one DOD appraisal provides the necessary information without the added complexity or cost of a second valuation.

Conclusion

Deciding between one or two appraisals depends on the timeline of the estate settlement, whether transactions like sales or buyouts are involved, and potential tax implications. While a Date of Death appraisal often meets basic requirements, extended settlement periods or significant market changes may necessitate a second appraisal to ensure fair, compliant, and tax-efficient asset distribution.

Have Questions?

If you’re looking for expert guidance on estate appraisals, I’m here to help. Whether you need advice, a second opinion, or an estimate, reach out to Joseph Mier & Associates at 985-230-0730 or email joe@jmappraisers.com. Let’s work together to ground your estate planning in accurate and reliable valuations.