What does deemed disposition refer to in estate management?

Deemed disposition refers to the tax treatment applied in estate management where an estate is considered to have disposed of its assets at fair market value at the time of the owner's death. This triggers a tax obligation on any unrealized capital gains. As a result, the estate is responsible for paying taxes based on the appreciation of assets that have not yet been sold, even though they remain in the estate at the time of death.

This concept is significant for estate planning, as it impacts the overall tax liability of the estate and can influence decisions regarding asset distribution. Understanding deemed disposition is crucial for advisors and individuals engaged in estate management to ensure they comply with tax regulations and manage potential tax liabilities effectively.