Although most people think that they have a fairly good idea about the value of their assets, sometimes determining the value of property can be complicated. Property that is more difficult to value may include stock options, antiques, art, collectibles, and similar assets. Appraisals may be appropriate for certain assets when an estate is administered after passing away, but this still does not address the issue of the appropriate time to determine an asset’s value. While most assets that are to be distributed under a will are valued based on the date of death, assets may be evaluated on an alternative date under certain circumstances.
The alternative valuation method may be employed to reduce the value of estate taxes in the event that the value of the assets significantly depreciate during the six month period following the property owner passing away. This option for determining the value of assets permits the asset to be valued based on the value during this six month window provided the asset has not been distributed, gifted, sold, or subject to any other form of disposition.
This method of alternative valuation for assets during the administration of a will may only be employed under the following specific circumstances:
• The alternative method will result in a reduced valuation of the decedent’s gross estate; and
• The total of generation skipping tax and estate tax will be lower after applying all credits.
When these conditions are satisfied, the alternate valuation method may be used to prevent the obligation of paying estate taxes covering the diminished value of an asset during the months following the passing of the owner of the property. While this approach to valuing assets in the context of the administration of a will can reduce estate tax liability, it will also result in the tax basis for the asset being stepped-up for the beneficiary that inherits the asset.
If you are concerned about the possibility that your beneficiaries under a will might be subject to estate tax for a depreciating asset, you might want to discuss this issue with an experienced New Mexico Probate Lawyer. The election to use the alternate valuation method must be made within one year from the date that the estate tax return for the decedent is due, so time is of the essence in seeking legal advice on this issue.
The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.
If you have questions about probate or wills, our Santa Fe, NM Estate Planning Attorneys at Jay Goodman & Associates, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.