Dollars & Sense - Decisions of an Executor

Executors are given court authority to follow the terms of a will and properly distribute the assets in a deceased person’s estate. How well they carry out their duties could have significant impact on how much of the estate is preserved. If there is no executor or appointed administrator, then any person in actual or constructive possession of any property of the decedent has the power to make certain elections. This would include a trustee. When the final income tax return is filed for the decent, an executor or other responsible person may make certain elections that could dramatically impact estate preservation. They can choose to value the estate as of the date of death or use an alternative date of six months later. There are special use valuations for closely held businesses. Some qualified family owned businesses have a special interest deduction. The individual responsible for settling the estate could request an extension for payment of estate taxes. He or she also determines the deduction of administration expenses and losses and what assets are eligible for the marital deduction. Each of these provisions carries with it some qualifiers. The use of an alternative valuation date for instance can only be used if it both decreases the size of the estate and the amount of taxes owed. This is to prevent attempts to get a higher cost basis for beneficiaries. An executor’s duties involves decision-making along with potential liabilities.

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