Legal Definitions - alternate valuation date

The alternate valuation date is a specific date used in estate tax law for valuing a deceased person's assets. It is set at exactly six months after the individual's death. When an estate is being settled, the executor or administrator generally has the option to choose whether to value all of the estate's assets either as of the date of the person's death or as of this alternate valuation date. This choice can significantly impact the total taxable value of the estate, depending on how the market values of the assets have changed during that six-month period.

• Example 1: A Declining Stock Portfolio

  Sarah passed away owning a substantial portfolio of technology stocks. In the five months following her death, the stock market experienced a significant downturn, causing the value of her tech stocks to drop by 20%. Her estate's executor could elect to use the alternate valuation date to appraise the entire estate. By doing so, the estate would report a lower overall value for tax purposes, potentially reducing the amount of estate tax owed, because the stocks were worth less six months after her death than on the date she passed away.

• Example 2: Fluctuating Real Estate Value

  Mr. Henderson died owning a large tract of undeveloped land. At the time of his death, the land was valued at $1 million. However, due to unexpected local zoning changes and a new highway project announced three months later, the market value of that land surged to $1.5 million by the alternate valuation date. In this scenario, Mr. Henderson's estate executor would likely choose to value the land as of the date of his death, rather than using the alternate valuation date, to avoid a higher estate tax liability that would result from the increased valuation.

• Example 3: A Mix of Assets with Varied Performance

  When Ms. Chen died, her estate included a diversified portfolio of assets: a stable bond fund, a volatile collection of rare coins, and a small business. Over the six months following her death, the rare coins significantly decreased in value due to a market correction, while the small business saw a modest increase after securing a new contract, and the bond fund remained relatively stable. The executor must evaluate the combined effect of valuing *all* these assets on the alternate valuation date. If the overall decrease in the coin collection's value outweighs the increase in the business's value and the stability of the bonds, the executor might choose the alternate valuation date to achieve a lower total estate valuation for tax purposes.