Date of Death Appraisal › Trust Property
Do I need an appraisal for a home held in a trust?
Usually, yes. A home held in a revocable living trust is included in the grantor's gross estate and receives a step-up in basis to fair market value as of the date of death under IRC § 1014. Establishing that value takes a certified retrospective appraisal — even though the trust itself avoids the public probate process through the Maryland Register of Wills and Orphans' Court.
Holding real estate in a Revocable Living Trust avoids court-supervised probate, but it does not bypass federal or Maryland tax obligations. Because the property is included in the grantor's gross estate under IRC § 2036/2038, the same date-of-death valuation rules apply as for any other estate asset.
No Orphans' Court inventory · direct trustee administration
IRC § 1014 step-up in basis · Maryland estate & inheritance tax
Both paths converge on the same requirement: a retrospective, USPAP-certified date-of-death appraisal that protects heirs, trustees, and the tax filings.
Locking in the stepped-up basis
When the trust or a beneficiary later sells the property, capital gains tax is figured on the difference between the sale price and the cost basis. The date-of-death appraisal resets that basis to fair market value as of the grantor's death, which is what protects heirs from decades of accumulated gain.
If a grantor bought a Baltimore County home in 1988 for $120,000 and it is worth $650,000 at death, the basis resets to $650,000. A later sale is taxed only on appreciation above that figure — not the full 37-year gain. Because Maryland tax calculations start from federal adjusted gross income, the stepped-up basis established federally flows directly into the Maryland return.
Why Zillow and SDAT won't hold up
Online estimates and Maryland SDAT tax assessments are routinely rejected during audits. The IRS and the Comptroller of Maryland require a USPAP-compliant retrospective appraisal performed by a state-certified appraiser to defend the declared basis. When the number is challenged years later, a certified report anchored to the date of death is what stands up.
Maryland estate tax & gross estate reporting
Maryland imposes a standalone estate tax with a $5 million exemption and a top rate of 16%. Trust assets are included in the Maryland gross estate, and for estates approaching or exceeding the threshold, Maryland Form MET-1 requires a formal appraisal from a certified appraiser to substantiate property values.
Maryland's exemption has held at $5 million since 2019 and is far below the federal exemption, so many families who owe no federal estate tax still face a Maryland bill. Note: Governor Moore has proposed lowering the Maryland exemption to $2 million, but as of 2026 that change has not been enacted — the threshold remains $5 million. For any estate near the line, a defensible date-of-death value is the difference between a clean filing and an audit exposure.
Maryland inheritance tax on trust transfers
Maryland levies a 10% inheritance tax on property passing to non-lineal beneficiaries — nieces, nephews, cousins, friends, or unmarried partners. Direct lineal heirs (spouses, children, grandchildren, parents, and siblings) are fully exempt. Property passing through a trust to a non-exempt individual is still taxable.
The trustee must file an Information Report with the local Register of Wills detailing non-probate trust assets, and the Register requires an appraisal or validated valuation to compute the clear market value on which the tax is based.
Fiduciary duty & beneficiary equalization
A trustee has a legal fiduciary duty to distribute assets impartially and accurately. A certified appraisal sets a fair, defensible value — the foundation for an equitable buyout when one beneficiary keeps the home and another takes cash or liquid assets.
Establishing the value now, even if the property is not sold immediately, also avoids having to reconstruct historical property conditions years later. It protects the trustee from breach-of-fiduciary claims and keeps distributions defensible if a beneficiary later disputes the figure.
Revocable vs. irrevocable trusts: when an appraisal applies
| Trust type | In gross estate? | Stepped-up basis? | Appraisal needed? |
|---|---|---|---|
| Revocable Living Trust | Yes — grantor retained control | Yes — IRC § 1014 step-up applies | Yes — to set new basis and assess transfer taxes |
| Irrevocable Grantor Trust | Depends on § 2036/2038 powers | Yes, if included in gross estate | Yes — to document stepped-up basis |
| Irrevocable Non-Grantor Trust (completed gift) | No — removed during life | No — carryover basis from grantor | Not for basis; may be needed for trust accounting or distribution |
What makes a date-of-death trust appraisal different?
A standard appraisal values the property as of the inspection day. A date-of-death valuation is retrospective: the effective date is anchored strictly to the grantor's date of death, using comparable sales that closed on or before that date and reflecting the home's condition exactly as it was then.
The appraiser explicitly excludes post-death market swings, hindsight, and any repairs or renovations made after passing. That discipline — pricing the property exactly as the market saw it on one specific past date — is what makes the value defensible to the IRS, the Comptroller, and any beneficiary who questions it.
Checklist for Maryland trustees
Confirm whether the trust was revocable at death and holds title by recorded deed; determine whether beneficiaries are exempt lineal heirs or subject to the 10% inheritance tax; engage a certified appraiser experienced in USPAP retrospective estate valuations; provide the report to your CPA or estate attorney for Form MET-1, IRS Form 1041/706, and future Schedule D reporting; and retain the full appraisal in the trust's accounting records to document basis for every beneficiary.
This page is general information, not legal or tax advice — coordinate the finalized appraisal with your attorney and tax advisor for your specific estate.