An Estate Can Pick Its Own Valuation Date. Here’s the Six-Month Do-Over That Cuts the Tax Bill When Markets Fall

Executors wield an often-overlooked option to select a valuation date for estate assets six months after death under IRS Section 2032, potentially lowering the estate tax bill during market downturns. This alternate valuation date election, applied via Form 706, applies solely to taxable estates and is only permissible when it reduces the gross estate value and estate tax liability.

However, the election may backfire if the estate owes no federal estate tax or if the asset values rebound, increasing the capital gains tax for the heirs. Executors must run the numbers, consider the tradeoff between estate and capital gains taxes, and consult with qualified professionals before making the election.