Homes With Heart – Heather Coombs-Perez

Organizing an estate can be a challenge, and the number of properties inherited by baby-boomers will continue to increase as their parents pass on. This brings into focus the complicated world of tax and estate laws, and increasing requests for home appraisal.

When buying a property we are generally familiar with the need for the lender to request an appraisal of the home during escrow, before approving the loan. Appraisals are both an art and a science. They take into account the market value of other homes sold in your area, the type of home you own, as well as any upgrades done to the home. Appraisers themselves are real estate professionals who specialize in providing Opinions of Value and have taken courses, undergone 2,000 hours of accompanied training, and passed State license exams.

In the case of inherited property where there is no estate tax liability because of exemptions such as the marital deduction, a real estate agent can be called on to provide an appraisal of the property for what is known as the “stepped up basis”. The stepped up basis is the amount that the property is determined to be worth at the time it was inherited and can have a significant impact on the amount of capital gains a beneficiary will be responsible for, should they choose to sell the property.

A realtor is in a position to provide a service appraisal ensuring that a house valuation listed from when it was bought in 1963 for example, is appraised for the correct stepped up basis in 2011. This provides the beneficiaries with important information on the current value of the home and what to expect should they decide to sell it.

For example, to minimize estate taxes, an executor may want to use the highest appraisal value. A property valued at $400,000 rather than $375,000 is then sold for $500,000 10 years later. The estate taxes would be higher if the $400,000 appraised value is used, however when selling it, only $100,000 in capital gains tax is payable. If the $375,000 value is used initially, $125,000 capital gains tax will be applied to the seller.

It’s important to be aware of the stepped up basis of a home to ensure you will not be hit with unplanned capital gains taxes should you choose to sell your inheritance. If parents want to pass real property down to their children it’s important for them to be aware of the need for an up-to-date appraisal before they pass on.

If you have a loved one in need of an appraisal for any purpose, please contact me and I will either conduct the appraisal myself, or put you in touch with a certified appraiser should you need one. Call or text direct to 310-259-7419 or email [email protected].

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