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How does date of death affect valuating an estate?

| Dec 7, 2020 | Probate Litigation |

The value of an estate is still eligible to be taxed after the estate owner dies, creating the need for estate valuation to determine the taxes owed. For Minnesota residents who are unfamiliar with the estate litigation process, this may seem like a daunting task. While it can be difficult, there are ways that you can calculate the value of an estate in a way very similar to how a financial professional would do it.

Gross estate vs. net estate

Similar to how gross income refers to the amount of money that you make before taxes are deducted, “gross estate” refers to how much an estate is valued before taxes are assessed and debts are repaid. Conversely, “net estate” is the assets within an estate that remain after debts, liabilities, credits and deductions have been applied. The net estate value is the value that determines the amount of estate taxes that will be owed.

Dates of valuation

The IRS allows for two valuation dates: a date of death valuation date and the alternate valuation date. The date of death valuation date determines the fair market value of each asset in an estate on the date that the decedent died. The alternate valuation date bases the valuation process on the fair market value of the estate’s assets six months after the decedent’s death.

An attorney who is well-versed in Minnesota estate litigation laws may help guide clients through the process of determining the value of the estate they are overseeing. This attorney may help a client take the steps necessary to avoid probate litigation and navigate other legal aspects of the estate planning process.

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