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What is the alternate valuation date?

The alternate valuation date is one of two methods for calculating the value of an estate for the purpose of determining tax liabilities. Usually, the estate is valued based on the how much assets are worth on the fair market on the day the person died, but if the heirs can inherit more by reducing tax burdens, they might be allowed to use the alternate valuation date.

The alternate valuation date is six months from the date a person died. At that time, the estate is worth the total fair market value of any assets held within. The estate might also have to account for any gains or losses from assets it sold between the date of death and the alternate valuation date. Using the alternate method, those assets would be valued based on their market values on the dates of the sale.

Usually, the only time the alternate valuation date is an option is if it will decrease the tax liability of the estate at the same time it decreases the overall value of the estate. With especially large or complex estates, decreasing the overall value could result in an increased value for heirs because of a greater relative decrease in tax burden.

If that last sentence sounds confusing, it's probably because estate tax law is complex. Many people don't concern themselves with the concept of estate taxes because the federal estate tax threshold seems so high. But if an estate involves a few pieces of property or a small business, it isn't hard to reach that threshold, and you also have to consider the impact of state laws on estate taxes. Working with an experienced professional to determine the best way to value an estate for tax purposes can be a good way to increase the value for heirs.

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