When a family member passes away, his or her relatives can be overwhelmed quickly. Not only are they grieving, but they must also take care of the legal obligations and paperwork necessary to settle the deceased’s estate. And because real estate properties are usually the most significant financial asset of the deceased, establishing their fair market value is a priority.

Whether the plan is to sell the property, pass it on to the designated heir(s), or estimate how much obligatory taxes will be paid on the estate, it is important to know the exact worth of the property at the time of the owner’s death. If the estate is going through probate, an accurate inventory of the decedent’s possessions—including any real estate properties—is required.

In any case, the most reliable way to find out the fair market value of a home is to order an estate appraisal, also known as a time-of-death appraisal or probate appraisal. Here is everything to keep in mind regarding this critical element of any estate settlement procedure.

What Is an Estate Appraisal?

After a death, it is often necessary to establish an exhaustive list of the deceased’s possessions, including what is often the most valuable asset: real property. Even if the deceased had a will, a time-of-death appraisal may still be required to settle his or her estate. This unique appraisal type is employed to distribute the estate equitably among the heirs, to plan the estate’s future, and to calculate the estate tax incurred.

If probate is necessary—as is the case when the owner passes away intestate (without a will) or when issues arise regarding the existing will—the court usually demands a detailed inventory of the estate, including the cash value of the decedent’s home as of the date of his or her death.

As such, the executor of the estate or the legal representatives should be prepared to order an estate appraisal promptly. To do so, they need the assistance of a professional real estate appraiser. Licensed real estate appraisers are neutral third parties with no interest in the future sale of the property. They produce objective reports that are defensible in court and will resolve disputes over value that may emerge later.

Understanding the Estate Appraisal Process: A Practical Way to Ease Probate Burdens

In most cases, an estate appraisal assesses the property’s value as of the deceased’s date of death (DoD). The effective date of the appraisal is not the day the appraiser inspected the property (which is usually the case in other forms of appraisal), but prior. This type of appraisal is known as a retroactive appraisal or historical appraisal and is ordered months, or even years, after the property owner passed away. To determine property value, the appraiser needs access to information regarding the property such as retrospective photographs, a detailed list of the improvements made since the decedent passed away, and other supporting documents.

Additionally, the cost of an estate appraisal depends on many factors, including the size and location of the property. Occasionally, any of the following conditions may elevate estate appraisal prices: the retroactive appraisal requires extensive research by the appraiser, the information is not easily accessible, or the effective date is in the distant past.

The appraiser will inspect the property without taking into account the improvements that may have been made after the decedent’s death, and he or she will compare it to properties in a similar condition that sold proximate to the date of death. Although it is not always immediately required (if the property is held in a living trust, for instance), a date-of-death appraisal will likely be needed at some point.

Estate Appraisals and Taxes: The IRS Are Also Involved in Inheritance

When an estate has a transfer of ownership due to death or inheritance, the Internal Revenue Service will demand the homeowner’s relatives provide an appraisal showing the property’s market value. The property is usually appraised as of the deceased owner’s date of the death; however, the IRS may permit an alternate valuation date (AVD), which is up to six months after the date of death of the owner. A time-of-death appraisal is pertinent if the market has declined and the estate has decreased in value over time. Two appraisals are required in this case: one based on DoD and another with an AVD.

If the property is placed in a trust, the IRS will insist on an appraisal after the death of the final grantor, to determine the value of the estate and establish the basis of the property held in trust. The IRS uses the information obtained to confirm whether or not (a) the estate value exceeds the currently enacted exemption amount ($11.4 million for 2019) and (b) the estate is subject to estate tax, commonly known as the ‘death tax.’ The federal tax code allows estates to exclude a portion of value in a tax year—up to a certain threshold—from being subject to estate tax. Estates may also be subject to state taxes, depending on the state of residence of the decedent; these state estate taxes often have a threshold level lower than federal.

Knowledge Is Power: A Summation of the Estate Valuation Process

Overall, estate appraisals are often necessary, mainly because they are essential to facilitating estate settlement and help solve many issues preemptively. When family members are actively mourning, the last thing they need is an insensitive approach to property valuation, which will only further compound their sorrow. To avoid the emotional consequences of drawn-out property valuations, the first step is to create a comprehensive record of the deceased’s assets. Secondly, the heirs, executor, or attorney should order an appraisal. Before doing that, however, they should seek professional help to determine what kind of appraisal they need (typically a retroactive appraisal or historical appraisal). Lastly, it is worth noting that the IRS will get involved at some point; hence, the grieving heirs should prepare for this eventuality. The best way to proceed is for inheritors and their representation to brace for potential litigation and the IRS’s participation by equipping themselves with relevant and timely information on value and the estate settlement process.

If you’ve ordered an estate appraisal before, what are your recommendations for someone currently facing this situation?

The post Estate Appraisals in Massachusetts: Everything You Need to Know appeared first on Boston Appraisal Services.

Probate transactions carry with them a special responsibility to conduct thoughtfully and diligently. Both the families and professionals involved in the probate process deserve respect and genuine care.

Here we’ll talk about some of the things to think about in handling probate cases for real estate professionals and others involved in the process.

New rules have recently made it simpler to file for probate in Massachusetts and reach the resolution needed.

When do I need to file Probate? What’s the time frame?

When someone passes away intestate, meaning without a will, the government steps in to determine how assets will be distributed. When the deceased person leaves a will that specifies beneficiaries, then no probate is typically necessary, unless the validity of the will is in question.

If the decedent (deceased) had a surviving spouse or a joint tenancy was in place, the property will automatically pass to the surviving party, and no probate will be necessary. For the majority of cases, probate must be filed within 3 years of the decedent’s passing.

The process usually takes around 12 months. Please speak to an attorney at this point to discuss the specific filing requirements and the associated time frame for each step. The process can vary among localities, so be sure to speak with local professionals, as well as local officials before making any decisions.

Get in Touch with all the Heirs and Coordinate Parties

Once you’ve conferred with appropriate council, it’s time to get organized. Utilize your favorite project management tool to outline and track all the tasks. Also take the time to identify all the parties and professionals that will be involved in the proceeding. Whether you’re the executor, an heir, or an associated professional, it’s within your purview to take charge, organize, and ensure that everyone and everything is coordinated throughout the process.

If there are likely to be multiple heirs, start the process of contacting them and gathering information as early in the process as possible. Due to the emotional nature of the situation, it can sometimes take parties a little extra time to respond and be willing to move forward with the process.

Court Process – Appointment of Executor

After the case is opened and the process is underway, an executor or personal representative will be appointed by the court based on the direction of the will and presence of heirs, or the lack thereof, in which case an interest third-party may serve. Where there’s no will and a spouse survives, they receive first priority to be appointed as executor.

The court will review the details of the case and determine how to distribute assets to satisfy debts and taxes, and the rights of heirs. The executor will then carry out the directions of the will and instructions of the court, including the sale of any assets, including real property needed to satisfy the will and court.

Property Valuation

If the process indicates that real estate must be sold, it will likely need to be sold at fair market value. Factors affecting value include functional and economic obsolescence, location, condition, and conformity with surrounding properties. The best way to avoid complications and disputes regarding the value of the property and the best listing price is to order a comprehensive real estate appraisal to provide a credible and objective opinion of value.

Despite needed upgrades or repairs, the property may be worth more than anticipated. Don’t accept the first offer from investors. Take the time and invest in a qualified appraisal (or encourage your clients) that will lend certainty and impartiality to your decision in selling the property or accepting an offer. Please click here to place a prompt order.

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