Qualified heir
A qualified heir is a person who receives qualified real property from an estate and meets the conditions for special use valuation under section 2032A. The term matters to owners of businesses, real estate and private investments because the identity of the person receiving property can affect whether an estate can claim that valuation. The rules also address heirs' consent and successive interests.
How it works
Section 2032A ties qualified heir status to property passing from an estate and to requirements for special use valuation. The requirements described include qualified use, ownership and material participation conditions, and a signed agreement concerning potential recapture tax.
Every qualified heir must expressly consent to personal liability under section 2032A(c) if property is disposed of early or qualified use ceases early. The fact sheet describes an election within nine months of death, together with estate-composition, ownership and use requirements.
Where it shows up for owners of businesses, real estate and private investments
Qualified heir status can matter when a business owner or landowner's estate passes real property to a family member. A fact sheet example says an estate could not claim special use valuation for a farm because the recipient was not a qualified heir.
The property described for section 2032A must be in the United States, pass to a qualified heir and be used in a qualified use. Ownership and material participation conditions also apply.
Points that are easy to confuse
A person who receives property from an estate is not necessarily a qualified heir for section 2032A.
A qualified heir's interest can also matter when an estate creates successive interests. Special use valuation is unavailable if any interest passes to a non-qualified heir, such as when a spouse receives a life estate and the spouse's brother receives the remainder.
Common questions
Does every person who receives estate property qualify as a qualified heir?
No. Section 2032A connects qualified heir status to special use valuation conditions.
Can a remainder interest affect special use valuation?
Yes. If successive interests are created, special use valuation is unavailable where any interest passes to a non-qualified heir. One example involves a spouse's life estate followed by a remainder to the spouse's brother.