Why is an Appraisal Required?
An appraisal of a decedent's estate is required in order to assess the actual cash value of the estate in its entirety. The total cash value of an estate is based on the cash value of individual assets. The appraisals help determine the value of the assets, so the estate can be divided equally. Some provisions of probate law require equal distribution of assets among heirs, such as all living children. Many wills also require assets to be divided equally among two or more heirs. Both estates distributed through probate and estates distributed by will depend on professional appraisals to determine property values. Federal and state law also require the estate to be appraised, in order to assess the overall value of its property and tax it accordingly -- which is especially true when valuing assets in high-value estates to determine whether estate taxes are due -- both federal taxes and in states that impose estate taxes.
What Does an Appraisal Involve?
An appraisal generally determines the cash value of real property and personal property. The cash value refers to the monetary value of the property as of the date of the decedent's death. The cash value assessment of real estate property, recreational vehicles and priceless antiques often requires an in-depth evaluation by a professional appraiser. A professional appraiser inspects the property and appraises it based on a list of industry-specific criteria. A house appraisal, for example, often includes a complete inspection of the property and calculations based on the size of the lot, number of rooms, new renovations, exterior amenities, location and current housing market. The appraiser considers comparable property sales on the date of the death of the decedent, to determine the fair market value of the property at that time.
What Types of Property Need to Be Appraised?
Upon the decedent's death, the estate administrator conducts an inventory of all property, including real property, personal property, bank accounts and retirement accounts. In general, all property should be appraised for its cash value, with the exception of less expensive items, such as those that could be sold at a yard sale. An inventory of estate property includes "non-cash" assets and "cash" assets. "Non-cash" assets, such as real estate, vehicles and jewelry, need to be professionally appraised to determine the cash value. Other "non-cash" assets, such as household goods, may be casually appraised at fair market value, based on the potential retail value of an item. "Cash" assets, such as bank accounts, do not require appraisals. Because the cash value of "cash" assets is clearly evident.
Who Completes the Appraisal?
An estate administrator inventories all the decedent's "cash" and "non-cash" assets. The list of inventory includes the type of property, description of the property and value of the property. The estate administrator is often responsible for determining the value of all "cash" assets based on account statements. The administrator should also include an assessment of real estate and valuable property, from tax assessors records or sale invoices and receipts. Probate cases often require the estate administrator to obtain professional appraisals for all real estate and valuable "non-cash" assets. In some states, the probate court accepts independent appraisals obtained by the estate administrator. In other states, the probate court assigns its own agent to obtain professional appraisals for all "non-cash" assets, on court-approved appraisal forms.