A house has been donated, and the client needs to establish a value for tax purposes. A donations appraisal could be specifically related to an estate, or you might be approached by a living individual who donated their condo to their church or some other charitable organization, and they’re looking to get tax benefits from it.
There are many situations where individuals donate properties to non-profit or charitable organizations, but normally there is some tax benefit involved. In most of these cases, the effective date of the appraisal would be the date of the donation
What is an estate tax? It is a tax levied on the value (usually the net value) of an estate of a deceased person before distributing funds and assets to heirs. As an example, you might be asked to develop an appraisal of the value of the deceased person’s house, commercial property, land, and so on, so that that party can correctly report the value of the properties to the IRS on the appropriate tax forms.
Logically, this situation would involve the IRS, so, in completing your appraisal, you would want to take a look at the IRS requirements and use the appropriate definition of fair market value.
A trust is an arrangement that allows a third party to hold assets on behalf of a beneficiary or multiple beneficiaries. A trust specifies when and how assets are distributed, so it’s usually much faster than the court-controlled probate process. For example, the trust might say, “The house goes to this person. The boat goes to this person. The vacant lot goes to this person.”
Depending on the type of the trust and the timing, an appraisal could be needed after a person dies, or it could be needed when the trust is first set up (while the person is still living). For some trusts, the client will need to order the current value of the property when they establish the trust. So rather than doing a retrospective appraisal, you are valuing the property as of a current date.
See our section on Probate Estate Appraisals for a more detailed overview.