Post-Mortem Estate Planning
By Joseph A. Bellinghieri, Esquire-
While many people may think that one plans his or her estate during life, there are numerous circumstances where estate planning continues after someone has passed away. This is why it is so important to pick the proper person to be an executor of an estate. There are numerous elections available to an executor that need to be analyzed. This is especially the case with high net worth clients. The type and level of activities required for settling an estate will depend on a host of factors, including the nature of assets and the state of planning that existed at the time of one’s death.
Some of the elections available to an executor include an Alternate Valuation Election. This election allows the estate to take a second snapshot of the asset value six (6) months after the date of death and, if applicable, to elect to use this alternate valuation in filing its returns. To be able to use the alternate valuation date, two conditions must be present. The value of the estate’s assets must have declined since the date of death and the use of the alternate valuation must result in the reduction in taxes.
Another election available to an executor is the decision to deduct administrative expenses. If no estate tax is payable, either because the decedent’s property falls below the exemption equivalent or because the unlimited marital deduction is being used, or by a combination of these, administration expenses such as executor and attorneys fees which are deducted on an estate tax return should be deducted on the estate’s income tax return to offset income.
A QTIP (Qualified Terminable Interest Property) election is another election an executor has the ability to make. This is done where a decedent provides his or her surviving spouse with a life estate or lifetime income interest in specific property. In this case, the executor may elect to have the property underlying such interest treated as QTIP thereby making such property eligible for the federal estate tax marital deduction.
There are other decisions that an executor must make such as whether any beneficiary would want to file a disclaimer. A disclaimer must be made within nine (9) months. A qualified disclaimer is an irrevocable and unqualified refusal to accept an interest in property which satisfies certain conditions under the Internal Revenue Code. There are numerous reasons why one would want to file a disclaimer including the utilization of the exemption amount or the increase in the marital deduction.
Another decision that an executor must make is the selection of a fiscal year-end for the estate. This is very important as the executor has the ability to defer income to future years. There are also numerous tax decisions that need to be made by an executor, such as managing distributions to minimize overall tax and claiming an estate tax deduction for any income in respect of a decedent. There is also a decision that needs to be made in regard to any distributions from qualified plans that should be considered during the post-mortem process.
As you can see the decision of whom to appoint as one’s executor is extremely important. In the event you need any assistance, please contact Joseph A. Bellinghieri at 610-840-0239 or [email protected].
Joseph A. Bellinghieri represents individuals and businesses with a variety of estate, tax, real estate, and business issues. With over twenty years of experience, Joe is a seasoned attorney.