What Is the Fair Market Value of Inherited Property in California? How It’s Determined and Why It Matters

If you’ve recently inherited real estate or other assets in California, one of the first legal and financial terms you’ll hear is “fair market value” (FMV). Understanding how FMV is calculated—and why it matters—is essential when administering a trust or estate, preparing tax documents, or deciding whether to sell or retain inherited property.

What Does “Fair Market Value” Mean?

Fair Market Value refers to the price that a willing buyer would pay and a willing seller would accept for a property or asset, with both parties having reasonable knowledge of the facts and no undue pressure to buy or sell.

In estate and trust administration, the FMV is typically determined as of the decedent’s date of death, and it applies to real estate, stocks, personal belongings, and other inherited assets.

Why Does FMV Matter in Inheritance?

Fair Market Value plays a critical role in several areas of estate and tax law:

• Step-Up in Basis: The inherited asset’s cost basis is “stepped up” to its FMV at the date of death, which can significantly reduce capital gains taxes if you later sell the asset.

• Estate Tax Valuation: FMV is used to calculate the total value of the decedent’s estate for possible estate tax exposure.

• Trust and Probate Accounting: Trustees and personal representatives must disclose asset valuations in reports to beneficiaries or the probate court.

• Equitable Distribution: Accurate FMV ensures fair treatment among multiple heirs or beneficiaries.

How Is FMV Determined for Real Property?

In California, FMV for real estate is often established using one or more of the following methods:

• Certified Appraisal: The most reliable option, especially for valuable or contested properties. A licensed real estate appraiser will consider recent sales, condition, location, and other factors.

• Comparative Market Analysis (CMA): A real estate agent may offer a less formal estimate based on recent nearby sales.

• County Assessor Records: These may offer a general idea, but assessor valuations are not always accurate for probate or trust purposes.

⚠️ If you’re preparing a trust accounting, settling an estate, or reporting to the IRS, a professional appraisal is strongly recommended.

FMV for Other Inherited Assets

FMV must also be determined for:

• Publicly traded stocks – based on the average market price on the date of death

• Personal property – such as vehicles, art, jewelry, and collectibles (often requires appraisal)

• Business interests – may need a valuation by a CPA or valuation expert

Each category of asset has its own standards for FMV, so it’s important to consult a professional if the asset is complex or high in value.

Common Pitfalls in Determining FMV

• Using outdated valuations or property tax statements

• Failing to document how FMV was calculated

• Delaying the valuation, leading to inaccurate distributions

• Not hiring a qualified appraiser for real estate or personal property

These mistakes can lead to disputes among beneficiaries, IRS scrutiny, or unexpected tax liabilities.

Final Thoughts

Determining the fair market value of inherited property is a vital step in trust administration, probate, and tax planning. Getting it right ensures compliance, fairness, and peace of mind for all parties involved.

Need Help Valuing an Inherited Property?

At Moravec Varga & Mooney, we help trustees, executors, and beneficiaries understand their legal obligations when dealing with inherited assets. Whether you need guidance on property valuation, trust administration, or estate distribution, we’re here to provide trusted, experienced counsel.

Contact the top-rated California trust and probate attorneys Moravec, Varga & Mooney today to schedule a telephonic consultation. Have questions? call (626) 460-1763 or email LV@MoravecsLaw.com.

Southern California Probate Lawyer Serving all counties in California, including Los Angeles, Riverside, San Bernardino, Sacramento, Santa Cruz & Beyond.