When Should a Date of Death Appraisal Be Done?

A date of death appraisal should be ordered within the first few weeks after someone dies whenever the estate holds real estate, a closely held business, or other assets that don’t have an obvious market price. The appraisal fixes fair market value as of the exact date of death, and that number drives federal and state estate taxes, the basis each heir inherits, and the inventory filed with the probate court. Waiting is the main risk: the effective valuation date never moves, but the historical market data an appraiser needs gets harder to reconstruct the longer you wait.

What the Appraisal Is Actually Doing

This is a retrospective valuation. The appraiser determines what a willing buyer would have paid a willing seller on the specific date the owner died, even if the work happens months or years later. For real estate, that usually means pulling comparable sales that closed within a few months on either side of the date of death and adjusting for size, condition, location, and features. The further back the valuation date, the harder that research becomes, which is the practical reason not to sit on it.

Financial accounts and publicly traded stocks don’t need an appraiser. Statements and closing prices do the job. The appraisal exists for the assets that have no obvious price tag.

Deadlines That Pull the Appraisal Forward

Federal Estate Tax: Nine Months After Death

For people who die in 2026, estates with a gross value above $15 million must file Form 706, the federal estate tax return.¹ The $15 million exemption comes from the One Big Beautiful Bill Act, signed July 4, 2025, which raised and made permanent the expanded exemption under Internal Revenue Code Section 2010.

Form 706 is due nine months after the date of death. Filing Form 4768 grants an automatic six-month extension, pushing the deadline to fifteen months.² The IRS expects professionally supported valuations on that return, and a proper appraisal takes weeks to prepare, so the practical target is to have appraisals in hand well before the nine-month mark.

State Estate Taxes Can Trigger Filing at Much Lower Values

The federal number is high enough that most estates clear it. State estate taxes are where families get caught. Around a dozen states and the District of Columbia impose their own estate or inheritance taxes with thresholds far below $15 million. Oregon starts at $1 million. Massachusetts starts at $2 million. Minnesota kicks in at $3 million. Several others sit in the $4 million to $7 million range. These taxes apply independently, so an estate that owes nothing federally can still owe a state.

If the decedent lived in one of these states or owned property there, the appraisal is what determines whether the estate crosses the state threshold and supports the values reported. Check the rules early.

Portability Elections for a Surviving Spouse

When one spouse dies without using the full federal exemption, the surviving spouse can claim the Deceased Spousal Unused Exclusion (DSUE) by filing a complete Form 706, even if the estate is far below the filing threshold.² The nine-month deadline (with the six-month extension) applies. If that window was missed, a simplified late-filing procedure allows the portability election on or before the fifth anniversary of death, provided the estate wasn’t otherwise required to file.³

A portability-only filing is a lighter lift on values. The executor does not need precise numbers for property qualifying for the marital or charitable deduction and may estimate those in good faith.² Other assets should still be appraised properly to support the DSUE calculation.

The Alternate Valuation Date

The executor of a taxable estate can elect to value assets six months after death instead of on the date of death itself. This alternate valuation date, authorized by Internal Revenue Code Section 2032, is available only if it decreases both the gross estate and the total estate tax.⁴ It helps when asset values drop significantly in the months after death.

Assets sold or distributed within the six-month window are valued as of the date they were sold or distributed, not the six-month anniversary. The election is made on the estate tax return and cannot be reversed.⁴ If the executor is even considering this election, the estate may need two rounds of appraisals: one at the date of death and one at six months (or at the disposition date for anything sold in between). That’s another reason to start early.

Why Heirs Need the Appraisal Even When No Tax Is Owed

Under Internal Revenue Code Section 1014, the tax basis of inherited property resets to fair market value on the date of death.⁵ This is the stepped-up basis, and it can save heirs real money.

Consider a house a parent bought in 1985 for $80,000. At the parent’s death in 2026, it’s worth $450,000. Without the step-up, selling the house triggers capital gains tax on $370,000 of appreciation. With the step-up, the heir’s basis becomes $450,000, and a sale at that price produces zero taxable gain. The appraisal documenting the $450,000 is what protects the heir if the IRS ever questions the reported basis years down the road.

The step-up runs both directions. If an asset lost value before the owner died, the heir’s basis steps down to the lower fair market value. Either way, you want the number pinned down while the market data is still fresh.

For estates that do file Form 706, the executor also files Form 8971 and furnishes a Schedule A to each beneficiary, reporting the basis of inherited property. This is due 30 days after the Form 706 filing deadline or 30 days after the return is actually filed, whichever comes first. The basis numbers on Form 8971 come straight from the appraisal. Estates that file Form 706 only to elect portability are not required to file Form 8971.⁶

Which Assets Actually Need One

The assets that demand professional valuation are the ones without an obvious market price.

Real estate. Residential homes, commercial buildings, rentals, and undeveloped land all need an independent appraisal. Tax assessor values rarely track actual market value.
Closely held business interests. Ownership stakes in private companies and partnership interests require analysis of earnings, assets, industry conditions, and comparable transactions. Partial interests often carry discounts for lack of control and lack of marketability, and those discounts need to be supported with real data rather than a made-up percentage.
Tangible personal property. Fine art, antiques, jewelry, rare collectibles, and specialty vehicles need an appraiser with expertise in that specific category. A real estate appraiser cannot value a coin collection.
Unusual financial assets. Promissory notes, mineral rights, patents, and other intangibles that don’t trade publicly need someone who understands the asset class.

Assets that pass outside probate, such as retirement accounts with named beneficiaries, life insurance, and property held in joint tenancy with right of survivorship, do not require an appraisal for probate purposes. Even so, a valuation may still be worth doing if the estate is taxable or if the beneficiary will eventually sell and needs to document basis.

An estate that falls below the federal threshold and every applicable state threshold, and holds no hard-to-value assets, can often close without a formal appraisal. That’s a judgment call. If there’s any chance an heir sells inherited property later, documenting basis at the right time is cheaper than reconstructing it years later.

Probate courts add their own pull. Most states require the executor to file an inventory of estate assets, and for anything without an obvious price, that inventory needs appraised values. Appraisals also keep the peace among heirs when the estate includes a house, a business, or a collection and one beneficiary takes the asset while another takes cash.

Choosing a Qualified Appraiser

The IRS does not accredit estate appraisers directly, but Treasury regulations set the bar. A qualified appraiser must either hold a recognized designation from a professional appraiser organization or have completed relevant coursework plus at least two years of experience valuing the specific type of property being appraised.⁷ The appraiser must also follow the Uniform Standards of Professional Appraisal Practice (USPAP).

Confirm the appraiser has experience with retrospective valuations. Not everyone is comfortable working with historical market data, and an appraisal that uses current comparable sales instead of sales from around the date of death is worthless for estate purposes. A residential real estate appraisal typically turns around in a few weeks; business valuations and specialty items take longer, another reason to start soon after death.

What Happens If the Value Is Wrong

The IRS imposes real penalties when estate asset values are materially understated. If the value reported on the estate tax return is 65 percent or less of the correct value, the IRS treats it as a substantial valuation understatement and applies a penalty equal to 20 percent of the resulting tax underpayment. If the reported value is 40 percent or less of the correct value, the penalty doubles to 40 percent.⁸

A well-documented appraisal from a qualified professional is the best defense. The IRS is far less likely to challenge a valuation backed by comparable sales data, a recognized methodology, and a credentialed appraiser. A low estimate without professional support is the kind of thing that draws an audit and the penalties that come with it.

1
Internal Revenue Service. What’s New — Estate and Gift Tax
2
Internal Revenue Service. Instructions for Form 706
3
Internal Revenue Service. Revenue Procedure 2022-32
4
Office of the Law Revision Counsel. 26 USC 2032 – Alternate Valuation
5
Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
6
Internal Revenue Service. Instructions for Form 8971 and Schedule A
7
eCFR. 26 CFR 1.170A-17 – Qualified Appraisal and Qualified Appraiser
8
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments