Perhaps you were just named executor. Perhaps you are a successor trustee holding a parent's trust papers, or an heir who now owns part of a house with your siblings. Either way, you are probably being asked "what is it worth?" before you have had time to grieve. Most people facing this process have never ordered an appraisal or read a brokerage statement with a tax question in mind. The good news is that valuation follows a clear order. This guide walks through each step in California: listing the assets, appraising the house, and understanding what the numbers mean for income tax, for property tax and for dividing the estate among heirs.
Before You Start: Key Concepts and Documents Commonly Gathered
Fair market value means the price a willing buyer and a willing seller would agree on. Neither is under pressure to act, and both know the relevant facts.
For inherited property, the controlling date is the date of the decedent's death. This is called the date-of-death value. The value does not come from the day an heir receives the property, and it does not come from the day the property is later sold. The California Courts self-help guide puts it the same way: the value is your best estimate of the fair market value "when the person passed away."
That one number does three jobs in a California estate:
- Federal income tax basis. Basis is the starting figure used to measure gain or loss when the property is sold.
- California property tax. The value bears on whether real estate is reassessed and on any exclusion claim.
- Estate administration. The value feeds the estate's inventory and helps divide the property fairly among heirs.
Before contacting an appraiser, the person in charge usually gathers several documents. That person may be the executor named in the will, a court-appointed administrator, or a successor trustee if the property is held in a trust. The documents are:
- certified copies of the death certificate
- deeds, vehicle titles or the trust instrument
- any prior appraisals and recent property tax bills
- bank, brokerage and retirement statements dated as close to the date of death as possible
Real property and personal property are valued differently, and the steps below take each in turn. Real property means land and buildings. Personal property means everything else.
Step 1: Identify Every Asset That Needs a Valuation
This first step is a list. The California Courts self-help guide describes it as making a list of everything the person owned. It also suggests listing high-value items individually, such as an expensive watch or a collection.
The guide sorts assets into two kinds:
- Real property is land and buildings. It also includes real estate leases of at least a 10-year term or with an option to buy.
- Personal property is everything that is not real property. It includes cash, bank and brokerage accounts, vehicles, jewelry, artwork, and documents showing a right to be paid, such as stock or a deed of trust. Business interests also fall in this category.
Each kind of asset may need a different valuation method or a different professional:
- Bank and brokerage accounts usually need no appraiser. A statement showing the date-of-death balance or holdings is the starting point.
- Publicly traded securities are valued as of the date of death using a method the IRS publishes. A CPA or the brokerage firm can confirm how that method applies to particular holdings.
- Real property is generally valued through a written appraisal by a licensed or certified appraiser.
- Valuable personal property, such as jewelry, art, collectibles or collector vehicles, may need a specialist appraiser.
- Business interests may need a business valuation professional.
For each item, the self-help guide asks for three things: how the person owned it, the value of the person's share, and any money owed against it. It also notes that a surviving spouse or domestic partner may own part of the property even if only one name appears on the title. The executor or administrator of a probate estate prepares this list. In a trust administration, the successor trustee prepares it for the trust's assets.
Step 2: Obtain a Qualified Appraisal for Real Property
The family home is often the largest asset, and also the hardest one to value from a desk.
A date-of-death appraisal is a retrospective appraisal. It sets what the property was worth on the date the decedent died, using comparable sales and market data from that period.
Who does the appraisal. In California, appraisers are licensed and certified by the California Bureau of Real Estate Appraisers. BREA's own page explains that the Licensing Unit sets minimum education and experience requirements and that its Enforcement Unit investigates complaints against licensed appraisers. If an estate must file a federal estate tax return, the IRS expects the valuation to hold up under review. A CPA or estate tax attorney can say what that requires for a particular estate.
What the report covers. An appraisal report typically includes:
- a description of the property
- the date of value, which is the date of death
- the method used: the sales comparison, income or cost approach
- an analysis of comparable sales
- the appraiser's signed certification
Ordering the appraisal later is common. Many estates order the appraisal months after the death. That is common and acceptable as long as the appraiser values the property as of the date of death, using data from that period.
Two values to keep apart. A date-of-death appraisal is not a current-market appraisal. If prices have moved since the death, the two figures can differ a great deal. The county assessor's assessed value is a third, separate number. It comes from the property tax system and does not replace an appraisal.
Fees vary by appraiser and property, and no figure is given here.
Step 3: Understand How Fair Market Value Sets Your Income Tax Basis
The stepped-up basis rule sets the heir's starting point for income tax. Under 26 U.S.C. § 1014(a), the basis of property acquired from a decedent is generally its fair market value on the date of death, not what the decedent originally paid for it. There are listed exceptions. One is an alternate valuation date, which an executor may elect on a federal estate tax return. A separate rule in 26 U.S.C. § 1014(e) applies to appreciated property the decedent received as a gift within one year before death, when that property passes back to the person who gave it or to that person's spouse; in that case the basis is the decedent's adjusted basis immediately before death.
In plain terms, gain or loss on a later sale is measured from the date-of-death value. If the property sells for close to that value, the taxable gain may be small. If the property has risen in value since the death, the gain is measured from the stepped-up figure. The IRS FAQ on this topic adds that the basis is generally the date-of-death value whether or not an estate tax return is filed.
The date-of-death appraisal is the document that supports this basis, which is why heirs keep it permanently.
How title was held can change the result. IRS Publication 551 explains that in community property states, which include California, the total value of the community property generally becomes the basis of the entire property when either spouse dies. That includes the surviving spouse's half. For this rule to apply, at least half the value must be includible in the decedent's gross estate. Joint tenancy and trust ownership raise their own questions. A CPA, enrolled agent or tax attorney reviews which rule fits the facts. The same professionals handle questions about tax planning around a sale.
The step-up in basis rule is worth understanding before any decision about the property is made.
Step 4: Address California Property Tax Reassessment
Property tax runs on a separate track from income tax. The county assessor administers it. The IRS administers income tax basis. Each system has its own rules.
The change in ownership statement. A transfer of real property at death is a change in ownership, and Rev. & Tax. Code section 480 requires a statement to be filed with the county recorder or assessor. Who files, and when, depends on how the property passes:
- If the real property is subject to probate, the personal representative (the executor or administrator) files the statement before or at the time the inventory and appraisal is filed with the court clerk.
- In other cases, including property held in a trust, the trustee or the person receiving the property files it within 150 days after the date of death.
If a statement is not filed within 90 days after the assessor mails a written request, a penalty can apply.
The parent-child exclusion. For transfers on or after February 16, 2021, Rev. & Tax. Code section 63.2 can exclude a parent-to-child transfer of the parent's principal residence from reassessment, in whole or in part. Two conditions apply:
- The home must become the child's principal residence within one year of the transfer.
- The child must file for the homeowners' or disabled veterans' exemption within a year of the transfer.
The same exclusion can reach a grandparent-to-grandchild transfer, but only if the grandchild's parents who are the grandparents' children have died by the date of the transfer. Family farms are covered as well.
Where fair market value comes in. The exclusion has a value limit. If the home's fair market value at the transfer exceeds the parent's taxable value plus a set amount, the excess is added to the new taxable value. The State Board of Equalization prescribes the claim form. The county assessor's office can confirm the current figure and its requirements. If no exclusion applies, the assessor sets a new value for the property.
Claim deadlines. A claim is generally filed within three years after the transfer, or earlier if the property is first transferred to a third party or the eligible child stops living there. A claim is also timely if it is filed within six months after the mailing of a supplemental or escape assessment notice. A later claim may still be considered if the property has not passed to a third party, but relief then applies only going forward.
Proposition 19 and inherited property covers these rules in more depth.
Step 5: Value Personal Property and Financial Assets
Sorting a parent's accounts and belongings can feel endless. Most of these assets, though, are valued from documents the family already has or can request.
Bank and brokerage accounts. A statement dated as close to the date of death as possible shows the value. The self-help guide notes that bank records are private and that a personal representative must be appointed to gain access to them. Statements found at the home can help in the meantime.
Stocks and mutual funds. These are valued as of the date of death. The brokerage firm or a CPA can apply the IRS method to each holding.
Vehicles. A published industry pricing guide as of the date of death is a common reference. A classic or collector vehicle may need an appraiser.
Jewelry, art and collectibles. These items may call for a specialist with credentials in that category, such as a gemologist or a fine art appraiser.
Business interests. A sole proprietorship, a partnership interest or closely held shares can be complex to value. Executors and trustees often bring in a business valuation professional early.
Retirement accounts. The date-of-death balance is a common starting figure. How an inherited retirement account is taxed is a separate question, and a CPA or tax attorney is the one to review it. IRS Publication 559 notes, for example, that the treatment of health savings accounts at death depends on who acquires the account.
Statements, appraisal reports and valuation notes all support the estate's tax filings and each heir's future basis, which is why families keep them permanently.
Step 6: Use the Valuations in Estate Administration and Distribution
Once the values are assembled, they go to work in three places.
In a probate. The executor or administrator files an inventory and appraisal with the court. The California Courts self-help guide notes that if the estate goes to court, a formal appraisal may be needed, even if an estimate was enough at the start. The court's procedures set who appraises which assets. A probate attorney or the court's self-help resources can explain how that works in a given county.
In a trust. A successor trustee administering a trust generally works without a court inventory. The trustee still identifies and values the trust's assets so they can be accounted for and distributed.
Dividing among heirs. When several heirs share an estate that includes a house, the date-of-death appraisal is the baseline for comparing the choices. One heir might buy out the others, the house might be sold, or other assets might be used to balance the shares. Inherited property with multiple owners covers the choices co-owners face. If heirs disagree about value or about how the estate is being handled, that becomes a contested matter, and it is handled by an attorney who litigates trust and probate cases.
Estate tax return. The valuations also support a federal estate tax return (Form 706) if one is required. Under 26 U.S.C. § 2032, an executor may elect on that return to value the estate's property six months after the death instead of on the date of death. Property distributed, sold or otherwise disposed of within those six months is valued as of the date it was disposed of. The election is allowed only if it decreases both the gross estate and the tax. A CPA or estate tax attorney determines whether a return is needed at all.
Typical Timeline and When the Process Gets Complicated
A straightforward date-of-death appraisal of a single-family home usually takes a few weeks, from hiring the appraiser to receiving the written report. Account statements can often be gathered alongside it. For many families, the work feels manageable once it is broken into steps, usually with a licensed appraiser, a CPA or enrolled agent, and sometimes a probate attorney.
Deadlines that shape the schedule
The 150-day change in ownership filing and the probate alternative described in Step 4 are fixed points. The Probate Code also sets when an inventory and appraisal is due in a probate. The executor or administrator can confirm that deadline with the court or a probate attorney. If an estate tax return may be required, the appraisals need to be finished before it is due, and a CPA or estate tax attorney sets that schedule.
Several properties, or property in another state
Each parcel needs its own appraisal. Property located outside California is governed by that state's law.
Specialized assets
Collections, closely held businesses and farmland can each require a different professional. That adds both time and coordination.
Disagreement over value
When heirs dispute a value, the process slows down. A contested matter is a different subject, handled by an attorney who litigates trust and probate cases.
