After death: the elections that still change the outcome

Estate planning does not entirely stop at death, which is a useful thing to know and a set of deadlines to respect.

Qualified disclaimers

A beneficiary can refuse an inheritance, and the property then passes as though they had predeceased.

To be a qualified disclaimer it must be in writing, irrevocable, made within nine months of death - or of the beneficiary reaching 21 - before accepting any benefit, and the disclaimant must not direct where the property goes.

That last requirement is the constraint. A disclaimer is not a redirection; it is a refusal, and the property goes wherever the document says it goes next.

The alternate valuation date

Six months after death, available only where the election reduces both the gross estate and the estate tax.

It is a fall-in-value provision. Property distributed or sold before the six-month mark is valued at that earlier date, and the election applies to the whole estate rather than to selected assets.

It also lowers the basis heirs receive, which is a genuine trade-off where the estate would owe no tax anyway.

The portability election

Filing a federal estate tax return to transfer the deceased spouse's unused exclusion to the survivor, even where no return would otherwise be required and no tax is due.

It is the single most valuable thing an executor can do for a surviving spouse in a moderately sized estate, and it is the one most often missed because nobody realizes a return should be filed at all.

Choosing the estate's tax year

An estate may adopt a fiscal year ending up to twelve months after death rather than a calendar year.

That allows income and deductions to be timed across two of the beneficiaries' tax years, which can materially reduce the total tax on income arising during administration.

Other elections

• Deducting administration expenses on the estate tax return or the income tax return, but not both.
• Special use valuation for qualifying farm or business real property, valuing it at its actual use rather than its highest and best use.
• The instalment payment election for a closely held business interest.
• Section 303 redemption to fund estate costs without dividend treatment.
• The income in respect of a decedent deduction, where estate tax was paid on income the heir will also be taxed on.

The last is worth knowing. An heir receiving a traditional IRA that was subject to estate tax may deduct the estate tax attributable to it as they take distributions, avoiding a genuine double tax.