Estate Planning Forum: timing the termination of an estate.

• Author: Downs, Bill
• Position: News & Trends

A recent question on CalCPA's Estate Planning Forum dealt with the timing of the termination of an estate.

The estate had a significant capital loss, which would be available to the heirs when the estate filed its final income tax return. The CPA requested clarification of the proper timing for closing of the estate. In short, what event establishes the date on which the estate is ended, for income tax purposes?

Rick Franceschini, a CalCPA Estate Planning Committee charter member, directed the questioner to Regulation 1.641(b)-3, Termination of Estates and Trusts.

There is some judgment to be exercised in determining when an estate or trust is terminated. In the case of a probate estate, there will be a final order for distribution, and the assets of the estate would be distributed some time after the order by the Probate Court.

"[A]n estate will be considered terminated when all of the assets have been distributed except for a reasonable amount which is set aside in good faith for the payment of unascertained or contingent liabilities and expenses ...," according to the regulation.

This can be comforting to those who thought that all of the assets had to be distributed...