When a parent dies leaving a California home, one of the earliest decisions the family faces is what the property is worth. That number does not just affect the eventual sale price. It anchors the stepped-up cost basis for federal capital gains tax when the property is sold. It supports Proposition 19 exclusion cap analysis. It determines fair buyout amounts if one sibling wants to keep the property. It appears in probate inventories and estate tax filings.
The right kind of valuation, done at the right time, protects the family. The wrong kind (or the right kind done too late) can create problems that surface years later.
For federal income tax purposes, when someone inherits real property, the tax basis of that property is generally "stepped up" to the fair market value on the date of the decedent's death. This is called the stepped-up basis. When the heir later sells the property, capital gains tax is calculated on the difference between the sale price and this stepped-up basis, not the price the decedent originally paid.
Example: A parent bought a Bay Area home in 1985 for $200,000. It is worth $1,600,000 when they die in 2026. Their child inherits and sells six months later for $1,650,000.
The stepped-up basis saved this family capital gains tax on $1,400,000 of appreciation that occurred during the parent's ownership. This is the single largest tax benefit in California inherited property, and it depends on establishing an accurate date-of-death value.
The IRS and California Franchise Tax Board accept various forms of valuation for stepped-up basis purposes, but the higher the property value and the more the situation might be scrutinized (large estate, later sale at meaningfully different price, family disputes), the more important formal documentation becomes.
The right time to get a date-of-death appraisal is typically within the first three months after the death, and no later than six months. Here is why timing matters:
Contemporaneous is more credible. An appraisal completed in the first few months, describing the property as it was at the time of death, is more credible than one prepared years later attempting to reconstruct that value.
Property condition changes. An unoccupied inherited home may deteriorate. Deferred maintenance surfaces. If a family member moves in, they may renovate. Getting the appraisal before these changes preserves the pre-death valuation.
Market conditions shift. California real estate values move. An appraiser looking at comparables from the death month is different from one looking at comparables a year later. Contemporaneous appraisal captures the intended point in time.
Coordination with other filings. If a federal estate tax return is required (only for estates over the federal exemption, currently $13.6 million in 2026), it is due nine months after death. The valuation supporting that return needs to be ready in time.
Federal tax law allows the executor of an estate that files a federal estate tax return to elect the "alternate valuation date," which is six months after death. This election is used when property values have declined since death and the family benefits from the lower value. This is a complex tax decision that requires professional advice.
Two common valuation methods exist for California residential property, and they serve different purposes.
| Feature | CMA | Formal Appraisal |
|---|---|---|
| Prepared by | Licensed real estate agent | Licensed real estate appraiser |
| Cost | Free or low-cost | Typically $500 to $1,000 for residential |
| Time to prepare | 1 to 3 days | 5 to 14 days |
| Methodology | Recent comparable sales in the area | Standardized approaches: sales comparison, cost, and income |
| Report format | Varies by agent, informal | Standardized formal report (URAR for residential) |
| Accepted for tax filings | Not usually acceptable as sole documentation | Yes, generally accepted |
| Accepted in court | Not usually accepted as primary evidence | Yes, generally accepted as evidence |
| Best for | Initial planning, agent selection, sale price discussion | Tax filings, court proceedings, buyouts, disputes |
The family wants to know roughly what the home is worth to inform early conversations about whether to sell, keep, or restructure. A CMA gives everyone the same reference point without significant cost.
Talking with agents about how to price and market the home. Agents typically provide CMAs during listing consultations.
Estates over the federal estate tax exemption ($13.6M in 2026) require formal appraisal documentation for all real property. The IRS scrutinizes valuations, and formal appraisals reduce audit risk.
When the sale will occur significantly after the date of death (more than a year later), and especially when the sale price differs meaningfully from a rough estimate, a formal date-of-death appraisal provides defensible documentation for the stepped-up basis calculation.
When one heir is buying out others, or when heirs disagree about value, a formal appraisal by a neutral licensed appraiser produces a defensible number that all parties should reasonably accept.
California probate cases involving real property typically require formal appraisal, often by a court-appointed probate referee (see below).
When determining whether the parent's assessed value plus the CPI-adjusted cap fully protects the inheriting child from reassessment, an accurate current fair market value is essential. A formal appraisal supports the position taken with the county assessor.
Successor trustees have fiduciary duties to all beneficiaries. A formal appraisal establishes value neutrally and reduces the risk of beneficiary claims that the trustee sold too low or valued property incorrectly for distribution purposes.
California is unusual in that probate cases involving real property typically require appraisal by a court-appointed probate referee, not just any licensed appraiser. Probate referees are appointed by the California State Controller and assigned by the court to specific cases.
Probate referee facts to know:
A probate referee appraisal is used for California probate court purposes. It may not satisfy federal estate tax requirements or produce a value that all family members find equally credible. Some estates use both: the probate referee for court, and a separate private appraisal for federal tax filings and family agreements.
When selecting a private appraiser (not the court-appointed probate referee), the following criteria matter:
California license. California appraisers must hold a valid license from the Bureau of Real Estate Appraisers. Verify licensure at bar.ca.gov.
Experience with inherited property or estate appraisals. These appraisals are technically retrospective (valuing at a past date, the date of death) rather than current. Appraisers who regularly do estate work understand the methodology and documentation requirements.
Local expertise. California real estate is intensely local. An appraiser familiar with the specific submarket produces more defensible values than one working from broad regional data.
Willingness to write a formal report. For tax and legal purposes, you want a written appraisal report (typically the Uniform Residential Appraisal Report or similar) that can be presented as evidence.
Independence. Do not use the same appraiser who is trying to sell you the property, and do not use an appraiser with financial interest in the outcome. Neutrality supports credibility.
Waiting too long to appraise. Getting an appraisal 18 months after death, when family finally starts thinking about a sale, means the appraiser is reconstructing value from stale data.
Assuming the county assessed value is accurate. California county assessed values are typically much lower than actual fair market value, especially for long-owned properties under Prop 13 protection. Do not use assessed value as a proxy for market value.
Using only a CMA when a formal appraisal is needed. A CMA is not accepted by the IRS or California Franchise Tax Board for stepped-up basis documentation. A CMA is not sufficient for court proceedings. A CMA is not neutral enough for meaningful family disputes.
Getting the appraisal but not the documentation. The appraisal is not the deliverable. The written report is the deliverable. Insist on a formal report you can file and produce years later if needed.
Not coordinating with the attorney and tax advisor. The appraisal supports specific tax and legal positions. Coordinating the appraisal purpose and methodology with the estate attorney and tax advisor produces documentation that actually supports the intended use.
Formal appraisals cost between $500 and $1,000 for most California residential properties. Larger, more complex, or luxury properties may cost more, sometimes $1,500 to $2,500.
Consider this cost against the stakes. On a $1.5 million property, a poorly documented stepped-up basis that gets challenged by the IRS could cost tens of thousands in capital gains tax on the difference. A neutral appraisal that resolves a sibling dispute preserves family relationships worth more than any dollar figure. A defensible probate value protects the executor or trustee from later claims of breach of duty.
A formal appraisal is one of the smallest expenses in California inherited property administration relative to its impact.
Wolf Allies connects families with agents who can prepare thorough CMAs and refer to trusted licensed appraisers for formal valuations when needed.
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