A family member died in 3/05 and left us two houses in California in a trust. We'd like to get appraisals that are hopefully below $1.5 million to avoid the estate tax. What happens if we then sell the two houses and the sale prices are above the appraised values? Is estate tax recalculated? Thanks very much.

Momo:

If the appraisal was done on the up-and-up by a certified real estate appraiser, then that appraisal should stand up to any scrutiny that may result if the subsequent sale is higher than the appraised value of the homes.

This really should not be a problem, since the appraisal process takes into account the sales value of similar properties in the locale of the appraised property. Further, given that it could take up to a year to sell a property after the appraisal takes place, property appreciation in a year's time has exceeded 50% in some of the hotter real estate market in the United States, so the IRS will probably not question a higher sale value.