When S1 died, his executor was given broad authority over his $9,000,000 estate.

Question

When S1 died, his executor was given broad authority over his $9,000,000 estate. The executor is considering two options -- Fund a QTIP trust with S1's estate and make a QTIP election to reduce his taxable estate to an amount that equals S1's AEA or Transfer S1's estate to his wife and elect AEA portability so that the wife can use his AEA when she dies. Assume that S1's estate includes property that is likely to double (or more) in value before his wife's death, why would the second option be a mistake?

Explanation / Answer

Second option is mistake as the wife will be transfered with the assets and the investment will not be possible which will result in loss of revenue and other mistake is that there would be no reduction in tax liability of the estate income in wife hands.

However it may be possible that the capital gain tax may be levied on the tranfer of such estates.

Other reason to go for first option is that estates will be invested for long with less tax liability.

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