How To Get A Date of Death Valuation

Dear Phyllis,
I am the trustee of my brother’s estate. The trust attorney’s secretary told me that I need a date of death valuation for his Eagle Rock home for tax purposes. Each time I talk to the attorney, it is $500, so I hope you can help explain where to get it and the approximate cost.
Lana

Dear Lana,
I am sorry for the loss of your brother. One of your first responsibilities as the trustee will be to provide the court and the IRS with an estimate of the estate’s “reasonable worth” at the time of your brother’s passing. This is known as a “Date of Death Valuation.” It typically involves an inventory and analysis of the possessions and property the decedent – your brother – left behind, including real estate.

When you sell his Eagle Rock home, there is a “step-up-basis” from the time of his death until the time of closing. There will be taxes on the capital gain. The gain is the difference in the value at the time of his passing after considering the net proceeds (brokerage, escrow and title fees, etc.). Some of the costs for improvements may also be deductible. However, check with your accountant to learn which improvement costs will be allowed.

Thus, assume the value at the time of his passing was $1,000,000; you sold for $1,200,000, and you had selling costs of $80,000; the gain would be $120,000 (minus any deductible improvement costs and or depreciation).

So how do you determine the value of your brother’s home on the date of his death? The most acceptable method to determine the basis is to hire an appraiser. This may cost around $800, and a real estate agent can recommend an appraiser.

If you list his home, an experienced trust real estate agent should be able to prepare a free Date of Death Valuation (aka date of passing evaluation). As a courtesy, I provide these for my trust clients when requested. When you hire experienced trust real estate agents, they will have familiarity in completing this valuation. Check with your attorney because they may believe the Realtor’s valuation will not have the same status with the IRS as would a full-blown appraisal. However, it will often suffice.
Phyllis