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July 10, 2014


Can a valuation date lead to estate tax savings?

The proverb goes that nothing is certain but death and taxes.

Even after death, your estate may need to pay taxes on the property transferred to loved ones. All the items receive a fair market value and become part of the “Gross Estate.” Property is a broad term. Some of the things included are real estate, business interests, securities held in retirement plans and cash in savings and checking accounts.

If the decedent died in 2014 with an estate valued at more than $5,340,000, an estate tax return must be filed. For 2013 and 2014, the estate tax rate is 40 percent. The value of a stock varies over time, so how is its value determined?

The executor can choose either the date of the death or an “alternate valuation date.” The alternate date is six months after the death. For the estate of one Texas billionaire, who died at the end of last year, this choice will result in substantial tax savings.

Shares in a closely held entity with majority stakes in four companies made up a good portion of the property that passed to two of his daughters. The share price on one of those company stocks has fallen steadily over the last six months. Selecting a valuation date six month from the date of death reduced the taxes owed.

While no one likes to take a loss, it is possible that the value of the shares will increase at some point in the future. This loss may only be on paper.

The fair market value of many types of property can fluctuate, which will affect the amount of estate and gift tax owed. However, if conduct by the one inheriting the property caused the slid in value it could prompt an audit. A tax attorney can better answer questions based on the details of your situation.

Source:, “Texas Billionaire Harold Simmons’ heirs save some money on taxes,” Matt Levine, June 27, 2014.