If your attorney or tax adviser requests an appraisal of the residence as part of a qualified personal residence trust (QPRT), the appraisal provides an independent opinion of market value as of a specified date. Paul A. Spiel develops that real-estate opinion. Your advisers determine how to use it in the trust and related tax reporting.
What does the appraiser value?
The attorney identifies the legal interest involved in the proposed transfer. For a residence with more than one owner, the attorney specifies whether the assignment concerns the whole property or a particular ownership interest. The report addresses the interest identified for the assignment, as of the date your advisers require. Paul uses those instructions to clarify the appraisal scope before the valuation work begins.
An opinion of value for the whole residence today does not answer a request for a particular ownership interest as of an earlier date. Getting the interest and date right at the outset gives your advisers a report that addresses their actual question.
Is the appraised value the same as the QPRT gift value?
Not necessarily. The appraisal develops an opinion of market value for the real estate or ownership interest identified in the assignment. A QPRT also involves a retained interest and legal and tax considerations. Your attorney and tax adviser determine how the real-estate value is used in the gift calculation and related reporting. Paul does not value the retained trust interest, calculate the taxable gift or determine the trust's tax treatment.
The federal QPRT regulation and IRS gift-tax instructions address that separate legal and reporting framework.
Why does the valuation date matter?
The effective date is the date the value opinion reflects. When that date is in the past, Paul considers the residence and the market as they were then. Today's photographs, asking prices and market conditions do not establish the earlier value.
Suppose the home gained an addition and a remodeled kitchen after the effective date. Those improvements are visible now, but they were not part of the house then. When available, prior listings, dated photographs, permits and renovation records provide evidence of the property's earlier characteristics and condition. A permit's issue date records authorization; it does not by itself prove when the work was finished. Paul weighs the available evidence and explains any relevant limitations in the report.
Sales must also be evaluated in relation to the effective date. A sale after that date can provide useful evidence, but Paul must examine whether it reflects the earlier market. A sale from the relevant period still requires analysis of the differences between the properties. When historical records are limited or the residence has changed substantially, Paul accounts for those gaps or changes in developing the earlier value opinion.
How are comparable sales selected?
The closest sale is not automatically the best comparison. Paul looks for properties that would have appealed to similar properties at the relevant time and examines the differences that would have an impact on value.
What information should be gathered before contacting Paul?
You do not need a complete set of records to begin the conversation. If your adviser has provided instructions, share them along with what you know about the property, its ownership and the date the value should reflect. For an earlier date, gather prior photographs or renovation records if you have them. It's always helpful to have any floorplans and surveys if possible. After reviewing what is provided, Paul identifies any additional information that would help complete the assignment.
Discuss the appraisal with Paul
Paul A. Spiel, SRA, is a State Certified General Real Estate Appraiser with 40 years of residential appraisal experience across a wide range of property types and price points, including complex and high-value homes. Spiel Appraisal Services handles trust and gifting appraisal matters across Palm Beach, Martin, St. Lucie and Broward Counties.
If your attorney or tax adviser has requested a QPRT appraisal, contact Paul to discuss the residence and the appraisal question. For related matters, see Trust Appraisals.