Alternate valuation date is an estate tax election under Internal Revenue Code Section 2032 that allows an executor to value estate assets six months after the decedentTMs date of death instead of on the date of death itself. The election is only available if it reduces both the total value of the gross estate and the overall estate tax liability. Alternate valuation can be beneficial when markets decline after death, lowering the taxable value of investments, real estate, or closely held business interests. However, it also affects basis for heirs and may interact with other planning elements such as marital and charitable deductions, life insurance proceeds, and funding of testamentary trusts. Because the election applies to the entire estate, not cherry-picked assets, it requires careful analysis by tax professionals.

Advisors encounter alternate valuation date decisions when working with estate attorneys and CPAs on larger taxable estates. They may help collect updated portfolio and business valuations at six months post-death so tax advisors can model the impact of using alternate valuation versus date-of-death values. Life insurance proceeds are generally not affected by market fluctuations, but the choice of valuation date can influence how much liquidity is needed for estate taxes and how testamentary trusts are funded. Advisors explain to beneficiaries that while alternate valuation date may reduce estate tax, it can also reduce their income tax basis in inherited assets. Understanding alternate valuation date helps advisors coordinate life insurance liquidity planning with estate tax elections and follow-on investment strategies for heirs.