When an estate includes real property, one of the first questions an estate attorney must resolve is deceptively simple: what is this property worth? But buried inside that question is a critical distinction that trips up even experienced practitioners—worth as of when?
The answer determines the type of appraisal required, the methodology the appraiser must apply, and ultimately the defensibility of the valuation before the IRS, a surrogate court, or opposing counsel. Here's what every estate attorney in Westchester County—and beyond—needs to understand.
The Core Distinction
A current market value appraisal establishes what a property would sell for on the open market today, based on present conditions, recent comparable sales, and the property's current physical state. This is the standard appraisal most people are familiar with—used for mortgage financing, purchase decisions, and listing prices.
A Date of Death appraisal (also called a retrospective appraisal) does something fundamentally different: it determines the fair market value of the property as of the exact date the decedent passed away—which may be weeks, months, or even years in the past. The appraiser must analytically reconstruct the market as it existed on that specific date, using only the data and conditions that were available at that time.
Key principle: A Date of Death appraisal is not simply a current appraisal with a note attached. It requires a fundamentally different methodology—one that demands expertise in historical market analysis and strict adherence to USPAP's retrospective valuation standards.
Why the Distinction Matters for Your Clients
The consequences of using the wrong type of appraisal—or an improperly performed retrospective appraisal—can be significant:
- IRS scrutiny on estate tax returns: The IRS requires that real property valuations on Form 706 reflect fair market value as of the date of death, not the current value. A current appraisal submitted in its place invites challenge and potential penalties.
- Step-up in cost basis errors: The stepped-up basis for inherited property is anchored to the date-of-death value. An inflated current value could misstate the heir's basis; an understated value could expose them to unnecessary capital gains tax upon sale.
- Equitable distribution disputes: When heirs are dividing an estate, a current appraisal performed months after the decedent's passing may reflect market appreciation (or depreciation) that occurred after the relevant date—creating an inaccurate picture for distribution purposes.
- Surrogate court compliance: Many courts require that estate inventories reflect values as of a specific date. A current appraisal, even if recent, may not satisfy that requirement.
When Is Each Type of Appraisal Appropriate?
Estate attorneys typically encounter both types in the course of settling an estate:
- Date of Death appraisal — required for estate tax returns, establishing stepped-up cost basis, formal estate inventories, and surrogate court filings. The effective date is fixed: the day of death.
- Current market value appraisal — appropriate when the estate is actively listing the property for sale, when a buyout between heirs is being negotiated at present, or when the court requires a current valuation to facilitate distribution.
It is not uncommon for an estate to require both appraisals—a retrospective valuation for tax and inventory purposes, and a current appraisal to assist with the eventual sale or buyout.
What Makes a Retrospective Appraisal Legally Defensible?
Not every appraiser is equipped to perform a high-quality retrospective appraisal. The appraiser must be able to demonstrate—through documented market research—that the comparable sales they relied upon were known (or knowable) to buyers and sellers at the time of the effective date. Post-date data cannot inform the analysis.
Additionally, the report must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) under Standard Rule 1-2(b), which governs retrospective assignments, and must clearly identify the effective date as distinct from the date of inspection and the date of the report itself.
When a valuation is challenged—whether by the IRS, a co-executor, or a beneficiary's counsel—the quality of the methodology and the completeness of the documentation become everything.
Working With an Appraiser Who Understands Estate Matters
Estate appraisals occupy a unique intersection of real estate expertise and legal process. The appraiser you engage should be comfortable with the nuances of retrospective valuation, familiar with the reporting requirements of the IRS and New York's surrogate courts, and capable of serving as a credible expert if the valuation is ever contested.
At Madison & Park Appraisal, we have extensive experience with estate and Date of Death assignments throughout Westchester County, Manhattan, and Greenwich, CT. We understand what estate attorneys and their clients need—a defensible, clearly documented valuation delivered on time and prepared to withstand scrutiny.
Disclaimer: The information in this article is provided for general educational purposes. It does not constitute legal or tax advice. Attorneys and their clients should consult with qualified legal and tax professionals regarding the specific requirements of their estate matters.