An estimated $1 trillion in inheritance is expected in Canada over the next 20 years, with the majority of it coming from real estate title transfers to baby boomers and their children, according to Sotheby’s International Realty Canada. Determining property value to settle an estate can be tense and difficult, particularly when there are multiple heirs who don’t agree on the numbers.

Impartial and unbiased

Professional real estate appraisers can clarify valuations using factual data derived from the marketplace, helping an estate executor better assess how to divide the assets — especially in situations where property wouldn’t be sold on the open market.

“The best part about going with an appraiser is that it’s a third-party impartial decision with no bias or preconceived notions,” says Robin Jones, AACI, P.App, President of AIC-Ontario. “If you’re dealing with parties that are at odds in terms of what the value is, it usually means one party thinks the value is higher, the other lower.”

Reconciling that discrepancy and addressing those concerns can be challenging for an executor without all the pertinent information. Using other sources, like tax bills or a realtor’s opinion, doesn’t always come with supporting documentation, he adds.

While there are professionals who do it, anyone can be designated as an executor — be it a friend, relative, or loved one who may or may not have a personal stake in the deceased’s will.

“Having an appraiser handle the valuation protects an executor, because a property can be sold after it has been passed on to heirs. But if it’s sold at a lower value and lessens the share, the executor can be held to task,” says Jones.

“The best part about going with an appraiser is that it’s a third-party impartial decision with no bias or preconceived notions."

Tax implications

The biggest concern tends to revolve around secondary residences, like cottages and investment properties subject to capital gains tax. Heirs who acquire these assets from a will would have to pay the costs once transferred.

“People realize that if they transfer property before they die, they can avoid probate fees, so by getting it all done beforehand, they can sidestep a lot of red tape,” says Jones. “The government really wants them to do it. They don’t want disputes between heirs to end up in the courts.”

To ease the process, the deceased could stipulate in the will that an independent appraiser be involved — a practice that Jones has noticed is becoming more common to avoid disputes and clear up any tax or financial obligations for heirs afterward.

“This is key to anyone who has a piece of property that they think the heirs might not want to sell. Or even cases where one heir may want title to the property while the other wants cash in a buyout,” he says. “An appraiser lays out the facts and numbers, letting everyone understand what the probate fees would be, regardless of who gets what.”

Helping settle disputes

Executors generally hire the appraisers, many of whom are members of the Appraisal Institute of Canada (AIC), he adds. In cases where settling an estate leads to litigation in court, AIC members can provide expert testimony before judicial and quasi-judicial bodies regarding real estate matters.

They are brought in as impartial experts, not advocates or witnesses for one side or another in front of a judge. “This set-up is limited to real estate matters, as personal property items such as art, collections, vehicles and other assets are valued separately.”

“No matter how it’s done, the idea is to provide everyone involved with a level of comfort to reach a solution,” Jones says. “It’s not just about property, it’s about a family legacy, and you want to make sure it gets passed from one generation to the next.”