What you need to know about the alternate valuation date strategy

On Behalf of | Dec 7, 2020 | Estate Valuation |

It is often the case that families in Minnesota and around the nation will find out about the hefty taxes they need to pay on an estate days after the relative’s death. According to the IRS, holders of an estate with an accumulative value of over $11.18 million must pay a 40% estate tax rate. This is a huge amount of money to lose, which is why people may seek to have an alternate valuation date. What exactly does this term mean? Read on to learn the benefits of choosing the alternate valuation date route.

Alternate valuation date and its advantages

A huge tax will be imposed on an estate if it passes the $11.18 million mark, so many accountants and estate planning attorneys recommend that the estate executor choose the alternative valuation date strategy. This move allows you to remove a large chunk of the taxes owed to the IRS. It is done by moving the reporting date of the assets’ value to at least six months after the relative has passed away. If those assets lose value and place the estate below $11.19 million, then it may be exempt or have reduced owed taxes.

The downside of an alternate valuation date

When the six months have passed and it’s time to value all the assets again, the government will need a re-valuation of assets and not just the ones that lost value. You may actually see a reduction in the value of the assets that really matter and a short-term gain on the rest. This might mean that you did not get the estate low enough to be exempt from the hefty 40% tax rate.

Estate planning is a complex process and should be aided by an accountant and a personal attorney. This may provide you with the knowledge needed to navigate the financial and legal obstacles that you could face along the way.