KO Appraisal
Trust Appraisal in California
A trust appraisal values real property held in a trust, most often as of the date of the settlor's death. Property in a revocable living trust passes outside probate, which means no probate referee is appointed and no court supplies a value: the trustee has to obtain one. That appraisal documents the beneficiaries' income tax basis under IRC § 1014, supports the trustee's duties to inform and account under the California Probate Code, and drives how subtrusts are funded and how distributions between beneficiaries are equalized.
Why avoiding probate does not avoid the appraisal
The point of a revocable living trust is that property passes outside probate. The consequence people do not anticipate is that nothing in the process forces a valuation. In a probate estate, the court designates a probate referee (Prob. Code § 8920), the referee appraises all property other than the property the personal representative appraises (§ 8902), and the Inventory and Appraisal must be filed within four months after letters are first issued to a general personal representative (§ 8800(b)). In a trust administration, nobody appoints anyone and nothing is filed.
The tax consequence is unchanged. Property held in a revocable trust at the settlor's death is treated as acquired from the decedent under IRC § 1014(b)(2), so its basis is adjusted, up or down, to fair market value at the date of death, or at the alternate valuation date six months later if that election is made on a filed federal estate tax return under IRC § 2032. If that value is never documented, the beneficiaries carry an undocumented basis, and the burden of proving it falls on them when they sell, often years later, from data that is no longer easy to reach.
Where the settlors were married and the property was California community property, IRC § 1014(b)(6) adjusts the basis of both halves at the first spouse's death, not just the deceased spouse's half. That is why a date-of-death appraisal at the first death matters to married California settlors even though no property changes hands and the survivor keeps living there.
The same property is also included in the decedent's gross estate for federal estate tax purposes, under IRC § 2038, because the settlor kept the power to revoke. A revocable trust changes who administers the asset, not whether it is counted. Whether any federal estate tax is actually due depends on the lifetime exclusion amount, which is indexed and changes from year to year; confirm the figure that applies with your CPA or estate attorney rather than with a number found online.
The trustee's own exposure
California imposes affirmative duties on a trustee that a supported valuation helps discharge. None of them name an appraisal; all of them are easier to satisfy with one.
- Probate Code § 16060: duty to keep beneficiaries reasonably informed of the trust and its administration
- Probate Code § 16061.7: notification to beneficiaries and heirs, served within 60 days after a revocable trust becomes irrevocable on the settlor's death
- Probate Code § 16061.8: an action to contest the trust must be brought within 120 days after that notification is served, or, where a copy of the terms of the trust is delivered to the person during that 120-day period, within 60 days after that delivery, whichever is later
- Probate Code §§ 16062 and 16063: duty to account to current income or principal beneficiaries at least annually, on termination, and on a change of trustee, with statutorily specified contents. The duty does not apply where the trust instrument or the beneficiary waives the account, or during a period when the trust is revocable and the person holding the power to revoke is competent (§§ 16064, 16069). Even where an account is waived, a court can compel one on a showing that a material breach of the trust is reasonably likely
- Probate Code § 16003: duty of impartiality where there are two or more beneficiaries
- Probate Code §§ 16040 and 16047: standard of care and the prudent investor rule, which govern decisions to hold, sell, or distribute real property
Where the number actually gets used
Trust appraisals do more work than probate appraisals because trusts do more things. At the first spouse's death, a survivor's/bypass (A/B) or QTIP structure often has to be funded, and the effective date for that allocation is whatever the trust's funding formula specifies. A fractional-share formula sets the fraction on date-of-death values, but allocating particular assets to that share still takes values as of the funding date; a true-worth pecuniary formula is funded on values as of the date of funding or distribution. A trustee frequently needs two effective dates, not one. Where a disclaimer structure is used, a qualified disclaimer under IRC § 2518 has to be made within nine months, which sets the schedule for everything else.
On distribution, trustees with non-pro-rata distribution authority need supported values to allocate different assets to different beneficiaries without creating a taxable exchange or a breach claim. Where one beneficiary wants to keep the house and the others want cash, the buyout price is the entire negotiation, and the trustee who sets it from a broker's opinion of value is the trustee who gets sued.
A trustee's sale of real property is not subject to Probate Code § 10309, the rule that a probate sale of real property at private sale cannot be confirmed for less than 90 percent of the appraised value, on an appraisal made within one year before the confirmation hearing and using a valuation date that also falls within that year. Not every probate sale is confirmed either: a personal representative with full authority under the Independent Administration of Estates Act can sell real property without court confirmation, after a notice of proposed action. What the trustee loses is the procedural check, not the duty: the trustee still has to be able to demonstrate that the price was supported.
Property tax is a separate system
Beneficiaries frequently conflate the appraisal with property taxes. They are separate systems. California property tax is an acquisition-value system under Proposition 13. Proposition 19 (Cal. Const. art. XIII A, § 2.1, implemented by Rev. & Tax. Code § 63.2) narrowed the parent-child and grandparent-grandchild reassessment exclusion to a family home that was the transferor's principal residence and becomes the transferee's principal residence (the transferee has to claim the homeowners' or disabled veterans' exemption, generally within a year of the transfer), or to a family farm. Where a settlor's revocable trust becomes irrevocable at death, the change in ownership happens at that death as to any interest that vests in someone other than the settlor or the settlor's spouse (Rev. & Tax. Code § 61(h); the original transfer into the revocable trust was itself excluded under § 62(d)). A later distribution to a beneficiary whose interest vested at that death is generally not a second change in ownership, so the Proposition 19 rules, and the one-year window to claim the exemption, run from the death and not from the day the trustee deeds the property out.
Even where the exclusion applies, it is capped. If the home's market value at transfer exceeds the transferor's factored base year value plus an inflation-adjusted allowance, the excess is added to the new taxable value. That allowance is recalculated every other year, not annually, so a dollar figure quoted in an article may be a superseded one. Confirm the amount in effect on your transfer date with the county assessor or the Board of Equalization before relying on it.
The county assessor makes its own determination of full cash value on a change in ownership. My appraisal is evidence a taxpayer can submit in an assessment appeal; it is not the assessor's determination, and ordering one does not by itself change your tax bill.
California levies no estate or inheritance tax, so the date-of-death appraisal is not being prepared for a state tax. It is being prepared for federal basis, for the trustee's records, and for the beneficiaries.
Working with me
I am Kevin O'Brien, MAI and SRA (designations of the Appraisal Institute), and a California Certified General Real Estate Appraiser, BREA certificate #3005065, listed on the ASC National Registry. Appraiser credentials are issued state by state; there is no national appraisal license, and I take California assignments only.
Before founding KO Appraisal in 2023 I was a Senior Real Estate Appraiser at JP Morgan Chase and an independent fee appraiser at MVT Appraisal. Trusts hold more than houses: I also appraise apartment complexes, neighborhood and community shopping centers, single- and multi-tenanted industrial buildings, low- to high-rise office buildings, mixed-use facilities, and vacant land.
Standard turnaround is one to three weeks, with rush appraisals available for urgent deadlines. I provide expert witness testimony and rebuttal analysis where a trust is in dispute.
Residential: (760) 685-8036, [email protected]. Commercial: (619) 704-7070, [email protected]. Office: 600 W Broadway, San Diego, CA 92101.
Common questions
The trust avoided probate. Do we still need an appraisal?
When should the trustee order it?
Can the trustee just use the assessor's value or a realtor's estimate?
What if the trust holds property in another state?
Sources
Every statutory and regulatory claim on this page traces to one of the following. Where a source could not be confirmed, the claim was removed rather than softened.
- IRC § 1014(a), (b)(2): basis of property acquired from a decedent is its fair market value at death (or at the alternate valuation date); property the decedent could revoke at death is treated as acquired from the decedent
- IRC § 1014(b)(6): where at least one-half of the whole of the community interest was includible in determining the value of the decedent's gross estate, the surviving spouse's one-half share of the community property is also treated as acquired from the decedent, so both halves take a new basis
- IRC § 2032: alternate valuation, six months after death, electable only on a filed federal estate tax return and only where it reduces both the gross estate and the estate tax due
- IRC § 2038: property subject to a power to alter, amend, or revoke held by the decedent at death is included in the gross estate
- IRC § 2518: requirements of a qualified disclaimer, including delivery in writing within nine months of the transfer
- Cal. Prob. Code § 8800(b): the inventory and appraisal must be filed within four months after letters are first issued to a general personal representative
- Cal. Prob. Code § 8902: the personal representative delivers the inventory to the probate referee designated by the court, and the referee appraises all property other than that appraised by the personal representative
- Cal. Prob. Code § 8920: the probate referee is designated by the court from among the persons appointed by the Controller to act as probate referee for the county
- Cal. Prob. Code § 10309(a): a sale of real property at private sale is confirmed only if the property was appraised within one year before the confirmation hearing, the valuation date used in that appraisal is also within one year before that hearing, and the sum offered is at least 90 percent of the appraised value; it does not govern trustee sales
- Cal. Prob. Code § 10400 et seq. (Independent Administration of Estates Act): a personal representative with full authority may sell real property without court confirmation, after a notice of proposed action
- Cal. Prob. Code § 16003: duty to deal impartially with two or more beneficiaries
- Cal. Prob. Code §§ 16040, 16047: trustee's standard of care and the Uniform Prudent Investor Act
- Cal. Prob. Code § 16060: duty to keep beneficiaries reasonably informed of the trust and its administration
- Cal. Prob. Code § 16061.7: notification by trustee when a revocable trust becomes irrevocable on the settlor's death, served within 60 days
- Cal. Prob. Code § 16061.8: a contest action must be brought within 120 days after the notification by the trustee is served, or within 60 days after a copy of the terms of the trust is delivered to the person during that 120-day period, whichever is later
- Cal. Prob. Code §§ 16062, 16063: duty to account to current income or principal beneficiaries annually, on termination, and on change of trustee, and the required contents of the account
- Cal. Prob. Code §§ 16064, 16069: exceptions to the duty to account and to report, including waiver in the trust instrument or by the beneficiary and periods during which the trust is revocable and the person holding the power to revoke is competent, and the court's power to compel an account on a showing that a material breach is reasonably likely
- Cal. Const. art. XIII A, § 2: Proposition 13 acquisition-value assessment and the base year value
- Cal. Const. art. XIII A, § 2.1 and Cal. Rev. & Tax. Code § 63.2: Proposition 19 family home and family farm exclusion, requiring principal-residence use by transferor and transferee and capping the exclusion at the factored base year value plus an inflation-adjusted allowance that the Board of Equalization recalculates every other year
- Cal. Rev. & Tax. Code § 61(h): a change in ownership occurs as to any interest in real property that vests in a person other than the trustor, or the trustor's spouse under Section 63, when a revocable trust becomes irrevocable
- Cal. Rev. & Tax. Code § 62(d): a transfer into a trust is excluded from change in ownership for so long as the transferor is the present beneficiary or the trust is revocable
- 12 U.S.C. § 3331 et seq. (Title XI of FIRREA): state-by-state appraiser certification and the ASC National Registry
- USPAP, STANDARDS 1 and 2: development and reporting of a real property appraisal
- Advisory Opinion 34, Retrospective and Prospective Value Opinions, USPAP Guidance and Reference Manual: guidance only, not part of USPAP, since the Advisory Opinions were broken out of USPAP into that separate publication as of 2024
- Cal. Bus. & Prof. Code § 11300 et seq.: Real Estate Appraisers' Licensing and Certification Law, under which BREA issues California appraiser credentials
Related reading
Next step
Tell me about the property.
Most assignments start with a short call, property type, the purpose of the appraisal, and the deadline you are working against. You get a fixed quote before any engagement, never contingent on the value reached.
Typical commercial fees range $2,000–$4,000. Residential and simpler assignments quote lower. Every engagement is quoted in advance, so the figure is known before work begins.