Most people facing this question have just been handed a role they never trained for. They may be an adult child named executor, a surviving spouse sorting through statements, or a successor trustee with a deed in one hand and a brokerage letter in the other. Somewhere in the first weeks, an accountant, a bank or a court form asks for "the value at the date of death," and it is not obvious what that means, who decides it, or why it matters so much. This page explains the idea, the federal tax rule built on it, and how California probate and trust administration put a number on each kind of asset.
What Date-of-Death Value Means
Fair market value is the price a willing buyer and a willing seller would agree on, with neither under pressure to act and both knowing the relevant facts. Date-of-death value is that price, fixed as of one day: the day the person died.
That figure is different from three numbers families often confuse it with. The purchase price is what the person paid years ago. The assessed value is the figure the county assessor uses for property tax, which in California can sit far below market. The current market value is what the asset would bring today, months after the death. None of these replaces the date-of-death figure.
The same date applies to everything the person owned. That includes the house and any land, bank and retirement accounts, stocks and mutual funds, an interest in a business, a car, jewelry, and household goods. Each is valued as of the same day.
That single number then serves two separate purposes. Federal tax law uses it to set an heir's income-tax basis under 26 U.S.C. § 1014(a). California probate uses it in the inventory and appraisal filed with the court. The next sections take each in turn.
Stepped-Up Basis: The Federal Income-Tax Rule
Basis is the starting number subtracted from a sale price to find the taxable gain. For property bought during life, basis usually begins with the price paid. Inherited property is treated differently.
The federal rule appears in 26 U.S.C. § 1014(a). Except as the section otherwise provides, it says that the basis of property acquired from a decedent "shall, if not sold, exchanged, or otherwise disposed of before the decedent's death by such person, be— (1) the fair market value of the property at the date of the decedent's death." The same subsection allows other values in narrow cases, including an executor's election of an alternate valuation date on a federal estate tax return.
The practical effect is easy to picture. Take a hypothetical: a parent bought a house decades ago for a small fraction of its value when they died. If the heir's basis were the parent's purchase price, a "carryover basis," nearly all of that growth could be taxable when the house sells. Under the stepped-up rule, an heir who sells for the date-of-death value generally has no gain, and only growth after the death is taxed. The IRS explains in Publication 559, Survivors, Executors, and Administrators that a gain or loss on inherited property that is a capital asset is considered long term, regardless of how long the heir held it, consistent with 26 U.S.C. § 1223.
How the property passes changes the paperwork, not the rule. Under 26 U.S.C. § 1014(b), property acquired by bequest, devise or inheritance, and property the decedent placed in a trust while keeping the right to revoke it, both count as acquired from the decedent. So the rule generally reaches property passing under a will, by intestate succession (the statutory order of heirs when there is no will), and through a revocable living trust. IRS Publication 551, Basis of Assets adds that in community property states, including California, the whole community property generally takes a new basis when either spouse dies, if at least half of it is includible in the decedent's gross estate.
One exception matters to some families. Under 26 U.S.C. § 1014(e), appreciated property that the heir or the heir's spouse gave to the decedent within one year before the death keeps the decedent's old basis.
A CPA, an enrolled agent or a tax attorney reviews how these rules apply to a particular estate. The related topics of step-up in basis and capital gains on inherited property carry these ideas further.
Date-of-Death Value in California Probate: The Probate Referee
Probate is the court process that settles an estate when property cannot pass any other way. In a California probate, the person in charge must tell the Superior Court what the estate owns and what it was worth. That person is the executor when a will names them, or the administrator when the court appoints someone because there is no will or no named executor able to serve. Both are personal representatives.
The rule for that list is short. Probate Code section 8802 provides: "The inventory and appraisal shall separately list each item and shall state the fair market value of the item at the time of the decedent's death in monetary terms opposite the item." In other words, the court's inventory is built from date-of-death values.
The personal representative gathers the records and lists the assets. In California, a probate referee then generally appraises most of them. A probate referee is an appraiser who works with the probate court and is assigned to the estate to put date-of-death values on assets such as real estate, securities and business interests. Cash and items whose value is plain on their face, such as a bank balance, are generally valued by the personal representative directly. The court and the referee's office can say which items in a particular estate go to the referee.
The finished inventory and appraisal is filed with the Superior Court and becomes the estate's official record of value for probate. Because it states fair market value at death, the same figure for a house is often the starting point for federal basis as well, so one valuation can do double work. A tax professional confirms whether it is enough on its own for a later tax return.
How Real Property Is Valued at Death
Real property means land and buildings. The California Courts' self-help guide on inventory and estimating property value adds that it includes real estate leases of at least a 10-year term or with an option to buy. Everything else, from a car to stock to cash, is personal property.
For a house, the date-of-death figure usually comes from a retrospective appraisal. A retrospective appraisal is dated as of the date of death rather than today. The appraiser studies comparable sales and market conditions as they stood on that day, then writes a report explaining the value. That report is the document a family keeps to support the basis figure on a later tax return. In a probate estate, the referee's appraisal fills the same role for the court.
Trust-held homes follow a quieter path. When a house passes through a revocable trust outside probate, there is no referee, but the successor trustee typically still obtains a retrospective appraisal, because the basis rule described above applies all the same.
Property tax is a separate track. Under Rev. & Tax. Code section 480, a death that transfers real property triggers a change in ownership statement filed with the county recorder or assessor. The personal representative files it in each county where the decedent owned real property subject to probate, before or at the time the inventory and appraisal is filed. In all other transfers by death, including through a trust, the trustee or the person receiving the property files within 150 days after the date of death. Whether the house is reassessed, and whether the parent-child exclusion in Rev. & Tax. Code section 63.2 applies, is a question for the county assessor's office, and the assessor's figure may differ from the appraiser's fair market value. That subject is explored further under California property tax on inherited property.
How Securities and Financial Accounts Are Valued
Financial accounts are usually the easiest assets to pin down, because the institution already has the records. For a bank or savings account, the date-of-death value is the balance on that day, shown on a statement. The California Courts' guide notes that bank accounts are private and a personal representative generally must be appointed to reach those records, though statements sometimes turn up in the person's papers at home.
Publicly traded stocks and mutual funds move every day, so federal tax rules set a method for fixing their value from trading prices on the date of death, with adjustments when the market was closed that day. A family rarely does that math alone. A brokerage firm or transfer agent will often prepare a date-of-death valuation statement on request, and that statement is the document an executor or trustee typically keeps. A CPA can confirm that the method was applied correctly.
Retirement accounts such as IRAs and 401(k) plans sit apart. Under 26 U.S.C. § 1014(c), the stepped-up basis rule does not apply to property that is a right to receive income in respect of a decedent, and inherited retirement accounts have their own distribution and income-tax rules. A tax professional reviews those.
In a probate estate, these same figures go into the inventory and appraisal. A family already gathering statements for the court is building the record a tax preparer will later need.
A formal written retrospective appraisal by a licensed or certified appraiser is the usual documentation in three situations. They are real property in any estate, real property passing through a trust, and any asset whose value is uncertain or disputed. Where family members disagree about value in a way that turns into a conflict, that becomes a contested matter, which an attorney who litigates trust and probate cases handles.
Smaller estates may never see a courtroom. California's simplified procedures include the affidavit for collection or transfer of personal property and the affidavit for real property of small value. Under Probate Code section 13100, the first is generally available when the gross value of the decedent's real and personal property in California, leaving out certain property the section excludes, stays under a dollar limit that is adjusted periodically, and 40 days have passed since the death. The California Courts publish the current figure. The courts' self-help guide says a family estimating value at the start does not need anything appraised, and that a formal appraisal may be needed if the matter later goes to court. Even when no court asks, the stepped-up basis still has to be supported for tax purposes.
The IRS can question a date-of-death value when it reviews an estate tax return or a later sale. Its frequently asked question on the sale of inherited property notes that an accuracy-related penalty may apply when a seller uses a basis above the property's final value for federal estate tax purposes. A careful appraisal is the record that supports the figure.
Larger estates face added steps. The IRS estate tax page explains that most relatively simple estates do not require a federal estate tax return, and that a filing is required above a threshold set for the year of death. Where a return is filed, valuation and appraisal standards become more exacting, and a tax attorney or CPA guides that process. How valuation affects a sale is explored further under taxes when selling an inherited house. This page does not cover how to list, price or sell the house itself.
