Question

Our deceased client had a gross estate valued at $14 million. his estate includes approximately equal values of the following: limited partnership interests that he has owned for four years in commercial office and retail buildings; these interests recently have shown less than 1% growth per year but nevertheless still produce significant income renovated apartments that have been decreasing in value at the rate of 12% per year due to deterioration of the neighborhood in which they are located personal property such as his home, cars, furnishings, and collections; the real estate values in his area have remained steady for the last several years your client's estate tax bracket is the highest allowed for the year of death. he has named his 21-year-old grandson as the executor of his estate. the grandson's income tax bracket is 12%. if the grandson came to you for advice, you should inform him that the postmortem action available and advisable to minimize estate tax liability for his grandfather's estate is

a) the use of the alternate valuation date for estate assets.
b) establish an intentionally defective grantor trust
c) the use of special use valuation on the commercial real estate holdings.
d) a waiver of executor commissions for the estate.

Answer 1

The best postmortem action to potentially minimize estate tax liability is the use of the alternate valuation date for estate assets, which might lower the taxable estate value due to decreased asset values after the date of death.

Step-by-step explanation:

The option that would likely help minimize estate tax liability for the deceased client's estate valued at $14 million is a) the use of the alternate valuation date for estate assets. Due to significant declines in the value of renovated apartments and slow growth in the limited partnership interests, the estate could benefit from the alternate valuation date if the value of the assets has decreased since the date of death. This postmortem action could result in a lesser valuation of the estate, thereby reducing the estate tax liability. It is important to note that in 2022, the estate tax applied only to estates exceeding $12.06 million, which means that this estate would indeed be subject to tax. The alternate valuation method may lower the taxable estate below the threshold or reduce the tax due, depending on the extent to which values have fallen.