Estate Planning and other use appraisals.
For use by the IRS or Estate Planning Attorneys & CPA's
In the appraisal of real estate, you are probably most familiar with ones for a bank; you want to refinance or sell a property, and an appraiser contracted by the lender comes out to your property and creates an appraisal report that will be used for lending purposes.
However, an appraisal performed for estate tax, planning, or gifting purposes is slightly different. Here’s some of differences:
· Different Definition of Market Value
Appraisals for lending purposes are considered to be a federally related transaction, which means that the Federal Deposit Insurance Corporation (or FDIC) or any regulated institution is involved and that the transaction requires the services of an appraiser. These types of appraisals are done based on a definition of market value found on the FDIC website.
· On the other hand, appraisals for estate tax purposes are prepared for the Internal revenue service (or IRS), which has a different definition of market value.
While the two are somewhat similar, it is important to know the difference because if an appraisal submitted to the IRS has the wrong definition of value, it may be rejected.
· Different Intended Users
The other difference between these two appraisals are the intended users of the report. For appraisals used for federally related transactions, the intended user is primarily the lender. However, appraisals for estate tax purposes need to list the IRS as an intended user. Additionally, there are typically other intended users for these types of appraisals, such as accountants who will be preparing your tax documents.
· How to Save Thousands on Appraisal Fees
An appraisal firm that specializes in performing appraisals for estate tax purposes is typically familiar with these differences. When considering an appraiser for your estate needs, it is important to interview them and ask if they have experience with preparing appraisals that go to the IRS. As additional screening, you could also ask what definition of market value they would use and who are typically the intended users for such a report (if they give different answers other than above, it might be beneficial to find another appraiser more experienced with this type of valuation).
In short, make sure you conduct your due diligence before hiring an appraiser. Appraisals (especially commercial real estate appraisals) can cost several thousand dollars, and if an appraisal prepared by someone inexperienced is rejected by the IRS, then you may have to order an entirely new appraisal.
There are a couple differences between appraisals prepared for lenders and appraisals prepared for the IRS. It is best to use an appraisal firm that knows the difference between the two; otherwise, you could end up paying more than you should. If you have any questions about appraisals for the IRS or the appraisal process, please contact us today. 770-748-6888
We preformed appraisals for both types of intended uses. In the past several years we have expanded our estate planning appraisal services and spent a great deal of time understanding various scenarios for each individual client. One approach does not always fit one client. There are a range of fees, and sometimes an appraisal is needed however many times an evaluation is sufficient to meet the client’s needs.
In short after you the client determines and communicates the intended use then we can suggest the most cost effective report for your needs.
We are commercial appraisers however we offer residential reports through our residential department. Many times there is a mix of commercial and residential properties in an estate of estate planning purposes.
The need for appraisals for estate and probate purposes is expected to increase. Estimates of the billions of dollars to be inherited by baby boomers are regularly featured in newspapers and the financial press. Much of those assets are in real estate. With the recent popularity of living trusts, and sophisticated tax avoidance methods for affluent individuals, appraisals are needed both for tax planning purposes prior to a property owner’s death, and for settling an estate after death.
As an overview, a non-exhaustive list of when an appraisal could be needed is: