An executor opens a $22 million estate. The stock portfolio dropped from $16 million to $13 million in six weeks. Without the alternate valuation date election, the estate pays tax on the higher figure. Meanwhile, a beneficiary has nine months to disclaim an inheritance she does not want, miss the deadline by one day and the option vanishes.
A qualified disclaimer under IRC Section 2518 lets a beneficiary refuse an inheritance as if they predeceased the decedent. The disclaimed property passes to the next beneficiary in line. Four requirements:
- In writing, delivered to the transferor's legal representative or title holder
- Made within 9 months of the transfer date (or 9 months after the disclaimant turns 21)
- The disclaimant has not accepted the interest or any of its benefits
- The disclaimed property passes without direction from the disclaimant
HIGH-FREQUENCY: Accepting any benefit (depositing a check, using inherited property, receiving income) permanently bars the disclaimer. The 9-month deadline runs from the date of the transfer, not from notice or will reading.
Common mistakes
- Missing the 9-month disclaimer deadline. The deadline runs from the date of the transfer (date of death), not from notice, will reading, or estate settlement. Accepting any benefit permanently bars the disclaimer. Trap: "Carol has 9 months from when she received notice", wrong, the clock starts at death.
- Applying the alternate valuation date selectively. It is all-or-nothing. Every asset is revalued. You cannot use date-of-death value for appreciated assets and alternate date for declined assets. Trap: "Elect the alternate date for the stock portfolio only."
- Deducting expenses on both returns. Each expense goes on Form 706 or Form 1041, never both. The executor must file a Section 642(g) waiver to claim on Form 1041.
Bottom line
- Qualified disclaimer: in writing, within 9 months of the transfer, no benefits accepted, and the disclaimant cannot direct where the property goes
- Alternate valuation date: all-or-nothing, 6 months after death, must reduce both gross estate AND estate tax
- Section 2032A special use valuation: qualifying farm or closely held business real property valued at current use, up to a $1,460,000 reduction (2026), with a 10-year qualified-use requirement and recapture
- QTIP election: executor's decision on Form 706, can be partial, calibrating the marital deduction precisely
Exam shortcut
When you see a recently deceased individual, check three facts: Did asset values decline after death? (Alternate valuation date.) Is a closely held business more than 35% of the adjusted gross estate? (Section 303 and 6166.) Is there a beneficiary who benefits from refusing the inheritance? (Qualified disclaimer.) If the question asks about expense placement, compare 40% estate tax rate to 37% income tax rate, the higher rate wins.
The full lesson (about 2,717 words, 18 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- G.62
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