A single overlooked tax change could cost your clients thousands in unexpected estate taxes.

The landscape of estate taxation is undergoing significant changes, with recent Tax Court rulings and increased IRS enforcement reshaping the field and potentially exposing your clients to substantial risks.

1. Fractional Interest Discounts

New IRS guidelines on discounts for lack of control and marketability on partial property interests are revolutionizing family-owned real estate valuations. Previously, these interests benefited from significant discounts due to perceived marketability and control issues. 

Now, the IRS is closely scrutinizing these discounts, necessitating a reevaluation of how these properties are valued.

• Increased Scrutiny: The IRS’s tighter regulations mean once-generous discounts are under heavy scrutiny. Family-owned properties, where ownership is divided among several members, need precise, current valuations to avoid undervaluing and the consequent financial pitfalls.

• Reassessment Needed: Accurate, up-to-date valuations are essential. Attorneys must ensure every fractional interest is valued according to the latest IRS guidelines to prevent costly mistakes.

2. Conservation Easement Valuations

The IRS’s aggressive stance on conservation easement deductions has transformed a once-reliable tax-saving strategy into a potential minefield. These easements, designed to preserve land and provide significant tax benefits, are now under intense scrutiny.

• High Audit Risk: Missteps in valuation can trigger audits and severe penalties. The IRS is challenging the legitimacy of many easement valuations, making precise and defensible valuations more critical than ever.

• Critical Accuracy: The days of easy deductions are over. Attorneys must understand and apply the IRS’s guidelines accurately to avoid significant financial repercussions for their clients.

Strategic Adaptation Required

These changes are not minor adjustments—they are significant shifts that can greatly impact your clients’ estate tax exposure and asset distribution plans. It’s essential not just to stay compliant but to stay ahead of these changes. The risks of substantial financial losses are real, and adapting your strategies to navigate this new terrain is crucial.

Adapting Your Strategies

How are you adjusting your strategies to manage these changes? Are you prepared to meet these challenges head-on? Reassessing and re-strategizing in light of these new guidelines is essential for managing complex estates effectively.

I’m Diana Benson, a seasoned real estate appraiser with Benson Appraisals, specializing in these complex changes. My experience in the greater East Valley area ensures that I understand both local market conditions and the latest regulatory shifts, enabling me to deliver accurate and defensible valuations.

Ensure your clients’ valuations are up-to-date and defensible against these new IRS guidelines. Contact me, Diana Benson, at 480-926-8528 or via email at [email protected] for more information on our services. Let’s work together to protect your clients’ legacies in this evolving tax environment.

Turn these challenges into opportunities for smarter, more resilient estate planning.