Why Bob Keebler Makes the Section 645 Election Almost Every Time

Summary

---

Podcast Summary: Why Bob Keebler Makes the Section 645 Election Almost Every Time

Podcast: AICPA Personal Financial Planning (PFP)
Host: Carey Sinnett (AICPA & CIMA)
Guest: Bob Keebler, CPA/PFS
Date: July 24, 2026

---

Episode Overview

This episode centers on the post-death tax planning strategy known as the Section 645 election. Host Carey Sinnett and leading tax expert Bob Keebler discuss how this election allows a revocable trust and the decedent's estate to be combined for income tax purposes. The conversation guides practitioners through the substantial benefits, timing opportunities, and practical implementation of this election, and highlights why Keebler almost always recommends it.

---

Key Discussion Points & Insights

1. Understanding the Section 645 Election (00:01 – 05:26)

• Main Concept: Section 645 lets a revocable trust and estate be treated as a single entity for income tax.

  • "With a single election, revocable trust and the decedent's estate can be treated as one combined entity for income tax purposes." (A, 00:47)

• This provides flexibility, potentially boosts tax savings, and offers strategic control over income and deduction timing.

• Distinct Tax Treatments:

  • Without the election:
    • Probate estates can use a fiscal year, have a $600 exemption, and less stringent estimated tax requirements.
    • Trusts are stuck with the calendar year, lower exemptions, and more immediate tax obligations.
  • Quote: "An estate can choose a fiscal year, but a trust cannot. An estate has a $600 exemption. A trust has a $300 exemption for a simple trust and 100 for complex. That's a nothing. But estates are not required to make estimates for two years..." (B, 03:43)

• Key Point: After a death, from a tax perspective, you generally want to be in an "estate" rather than a "trust" due to these rules.

---

2. Strategic Benefits: Fiscal Year Flexibility & Deferral (05:26 – 09:53)

• Tax Deferral:

  • Using a fiscal year can allow income to be recognized in a more advantageous tax year—e.g., if rates drop.
  • "Fiscal year could give me deferral... Let's say this year's tax rate was 39.6 and next year's tax rate was 37. I like 37 better than 39.6." (B, 06:00)

• Retirement Account Stretch:

  • Under certain timing, the fiscal year can effectively turn the "five-year rule" (for IRA distributions) into a six-year rule, spreading out distributions (and income) more efficiently.
    • "You can actually turn that five year rule into a six year rule... take out six $100,000 distributions rather than five $120,000 distributions." (B, 06:24)

• Estate S corporations:

  • The election helps protect S corporation status for up to two years after death.

---

3. Special Rule Differences: Deductions and Charitable Planning (09:53 – 14:29)

• Charitable Deductions (Sec. 642):

  • Easier for estates using a set-aside deduction (accrual method), allows upfront deduction for future charitable gifts.
    • "When you have an estate, you can use a set aside deduction. Think of it as a super accrual method." (B, 12:03)

• Netting Gains and Losses:

  • Pecuniary bequests funded with appreciated assets can trigger gain recognition.
  • "When you have a trust... you're not allowed to offset the gain with losses. However, when you have an estate, the law specifically allows you to net the gains and losses. And that's why a 645 election is such a useful tool..." (B, 13:33)

---

4. Practical Application & Real-World Considerations (14:29 – 17:52)

• Default to Election:

  • “Every trust administration after somebody dies is supposed to make his 645 election unless I give my permission to do something different. Okay. We're just automatically going to check that little box.” (B, 15:01)
  • Exceptions are rare.

• When Not to Elect:

  • Occasionally, practitioners may need or want to keep the estate and trust legally distinct—e.g. potential for estate insolvency or litigation concerns.
    • "If something was happening in my estate which would cause my estate to basically be insolvent bankruptcy, but somehow my revocable trust escaped that bad result, I might want to keep those as separate legal entities." (B, 16:49)

---

5. Takeaways for Practitioners (Throughout)

• Section 645 is a powerful, underutilized tool. Bob Keebler routinely recommends making the election except in rare scenarios.
• The fiscal year option, easier deductions, and additional flexibility can generate substantial client benefit.
• Practitioners should default to the election, seeking help from experienced peers only in rare complex exceptions.

---

Notable Quotes & Memorable Moments

"Fiscal year could give me deferral... Let's say this year's tax rate was 39.6 and next year's tax rate was 37. I like 37 better than 39.6."
— Bob Keebler, (06:00)

"You can actually turn that five year rule into a six year rule... take out six $100,000 distributions rather than five $120,000 distributions."
— Bob Keebler, (06:24)

"When you have an estate, you can use a set aside deduction. Think of it as a super accrual method."
— Bob Keebler, (12:03)

"Every trust administration after somebody dies is supposed to make his 645 election unless I give my permission to do something different."
— Bob Keebler, (15:01)

"If something was happening in my estate which would cause my estate to basically be insolvent bankruptcy, but somehow my revocable trust escaped that bad result, I might want to keep those as separate legal entities."
— Bob Keebler, (16:49)

---

Key Timestamps

• 00:01 – Introduction and setting the post-death planning stage
• 02:23 – Introduction of Bob Keebler and overview of Section 645 election
• 03:43 – Major differences between estate and trust taxation
• 06:00 – Fiscal year benefits, tax rate arbitrage, and IRA stretch
• 09:25 – Using fiscal years to manage post-death income spikes
• 11:30 – Practical advantages: S corporations, charitable deductions, and gain/loss netting
• 13:33 – Kennan case mechanics and netting of gains/losses
• 15:01 – Default guidance: make the 645 election almost every time
• 16:49 – Rare exceptions and when to not make the election

---

Action Steps for Practitioners

• Default to 645 Election: Unless a rare exception is clear, practitioners should make the election for maximum planning flexibility.
• Consult on Exceptions: If in doubt, leverage the PFP community or consult peers with deep fiduciary experience.
• Leverage Flexibility: Use fiscal year options and deduction rules to reduce tax burdens and optimize timing for beneficiaries.

---

Overall Tone

The episode is highly technical and practical, focused on actionable guidance for professional advisors. Bob Keebler’s advice is frank: use 645 nearly every time, because the nuanced planning benefits overwhelmingly outweigh any minor administrative hurdles. Both host and guest converse in an educational, collegial tone aimed at arming practitioners with tools to best serve clients during critical post-death windows.

---

For more technical resources or to connect with fellow practitioners, visit AICPA & CIMA’s Personal Financial Planning section.

Transcript

[A]

I'm Carey Sinnett and this is your personal financial planning podcast. The period immediately after someone passes away is one of the most consequential tax planning windows a family will ever face. Assets are changing hands, income may still be flowing through trusts, and the decisions made in those first few months can shape the the tax outcome for years to come. One of the most powerful and unfortunately often overlooked tools available to practitioners during this window is the section 645 election. With a single election, revocable trust and the decedent's estate can be treated as one combined entity for income tax purposes. That seemingly simple decision can open the door to fiscal year flexibility, strategic timing of income, and potentially significant tax savings for beneficiaries. But like many sophisticated planning strategies, the real value isn't just knowing that the election exists. The value lies in understanding when to use it, how to coordinate it with distributions and income events, and where the hidden traps might be. If you're a CPA financial planner who wants to deepen your understanding of using the 645 election, this episode is for you. Welcome to the American Institute of CPAs Personal financial planning Podcast. I'm Kari Sinnott. As the leader of the PFS designation, the financial planning credential exclusively available to CPAs, my role is to keep you informed, educated and connected to a premier community of thought leaders delivering trusted financial planning. We explore the full range of planning topics and the current events shaping our profession. To walk us through the strategy and the real world planning opportunities, I'm joined today by one of the profession's leading tax minds, Bob Keebler. Bob has spent decades helping practitioners navigate complex fiduciary taxation and today we're going to Explore how the Section 645 election can turn the post death administration period into a powerful tax planning opportunity. Welcome, Bob.

[B]

Thank you, Carrie. It's an honor to be here.

[A]

Let's unwrap this onion by diving into fiscal year arbitration and thinking about timing strategy. But my understanding is one of the most powerful aspects of the Section 645 election is the ability for the combined estate and trust to operate on an estate for fiscal year rather than a calendar year. So how should practitioners think about using this fiscal year flexibility strategically to manage post death income recognition and tax bracket arbitrage for beneficiaries.

[B]

Yeah, and let's just take a step back. If I have a probate estate, I die without a revocable trust. I have an estate and I'm subject to the rules regarding the taxation of estates. If I die With a perfect revocable trust, everything's inside it. And I make no further elections. I'm subject to the rules of the taxation of a trust. Now, the taxation of a trust is not as attractive as the taxation of an estate. We're just talking income tax, not no estate tax.

[A]

Right? So we're just separating those two different styles of how the income tax is going to be allocated.

[B]

Now, it's important to understand that an estate can choose a fiscal year, but a trust cannot start there. An estate has a $600 exemption. A trust has a $300 exemption for a simple trust and 100 for complex. That's a nothing. But estates are not required to make estimates for two years where a trust is required to make, you know, the normal quarterly estimates. So after somebody dies, we want to be in a state. Even if we have a revocable trust, we want to be in a state. And how do we get there from here? We make an election, a 645election, which we'll come back to. Carrie. Now, the other thing that's important, with an estate, you get an easier 642 deduction than you do with a trust. With a trust, you're on basically the cash basis or a modified cash basis of accounting for your charitable deductions. With an estate, you're on what's called a set aside deduction, meaning if that money has to be, quote, set aside for charity, I can take a charitable deduction. That is so, so critical. Now, what we do to bridge this gap is we make a 645 election that allows my revocable trust to be amalgamated with my estate and filed as one return. Now, that happens even if I don't have an estate, we can still file as an estate. So that's just very important.

[A]

And this is just for the purpose of income tax. This is not going to any estate tax issues. Do I understand that correctly?

[B]

Absolutely correct.

[A]

All right. Well, what is the one big difference of changing from a calendar year to a fiscal year? Is it just that we don't have to do the quarterly estimated taxes, and that allows us more time to figure things out and also when those payments are due, is that the biggest benefit of the fiscal year difference?

[B]

Well, it's deeper than that fiscal year could give me deferral. Let's say this year's tax rate was 39.6 and next year's tax rate was 37. I like 37 better than 39.6. But also, this is hard if you have an IRA going to an estate five year rule applies if you make the right fiscal year election. And our viewers will have to lay this out on a piece of paper. You can actually turn that five year rule into a six year rule because you're able to get an extra period in there and say you have $600,000 in an IRA, then you could take out six $100,000 distributions rather than five $120,000 distributions.

[A]

That's a pretty significant difference, especially if that's pushing you up into a higher tax bracket for the particular beneficiary. Thank you for helping me understand that a little bit better.

[B]

Yeah, that's a big deal. So we just have to understand that there's also some differences I didn't mention. We just have to be careful how s corporations are taxed. It's all about making sure you can protect that s election. Generally after somebody dies, you have a two year period where the s election is protected.

[A]

Okay, that's good to know in there. Once the election is made and the estate and revocable trust are treated as a single entity, how does that change the way planners should think about distributable net income and the timing of beneficiary distributions during administration. I really liked what you just talked about, being able to stretch a five year into a six year distribution. What other examples like that are meaningful?

[B]

Well, that's the biggest one. The deferral of one year is big. Now, what I just thought of when I was getting ready for this is the way opportunity zones reinvigorate themselves. January 1, 2027. You wonder whether some of this doesn't play into that. Now granted you just got a step up, but if you just got a step up and you bought just a pick on Nvidia and Nvidia went up after you died, you have a gain on that part. So when you sell, you might want to roll that into an opportunity zone. If that happens in 2027, a lot easier to do that than if it happens in 2026. Because really can't do an opportunity zone for gains in the first half of 2026.

[A]

And I think that has implications if there are stock sales post death and especially if there's concentrated positions and income coming in from that. So that makes a lot of sense. So let me kind of dive into that a little bit more. So many estates experience, you know, very significant income events shortly after death. Whether it's, you know, you're kind of alluding to this large IRAs or sometimes business income. Deferred compensation is a good Example, or even, you know, let's take Nvidia Concentrated Portfolio Sales. How does the section 645 election help practitioners manage or let's say, smooth out those income spikes during the administration period?

[B]

Well, I think if you have the 645election in place, take a piece of paper and just say somebody died July 1st. If we have a calendar year, and I'm stating the obvious, we obviously have to end 1231. However, if we have a fiscal year, we can go all the way to June 30th. And if we can go all the way to June 30th, that's just going to give us more time.

[A]

Absolutely.

[B]

We can spread that out more.

[A]

Okay. And anytime that you can have an extended period of time, that's going to be beneficial and you can make choices within that time period about how that income is distributed and attributable. Let me just take a moment and speak to you, listener. So this conversation is pretty technical, pretty detailed. Hopefully it's helpful. Hopefully it's meaningful to you. And if it is, you might want to join us at the AICPA Personal Financial Planning Symposium where the financial planning community comes together to learn from thought leaders. And Bob Keibler's workshop at the last symposium was technically deep and highly practical. And a lot of people afterwards told me that they were able to take what they learned there and immediately find it useful in their practice. So consider coming and exploring the ideas shaping the future of our planning. Strengthen your technical judgment, connect with peers who share your commitment to delivering trusted advice and be part of the conversation shaping what's next for financial planners. So Bob, I'm just going to be real honest here. Sometimes some practitioners might default to separate reporting for the estate and the trust because it feels administratively simpler. In your view, when does the planning value of the 645election clearly outweigh administrative convenience?

[B]

You have three specific issues. Maybe four. One is, with S corporations, a trust is limited to two years. An estate can go on during the administration of the estate. Two, the 642 charitable deduction is easier to obtain for an estate than it is for a trust. That's very important.

[A]

Can I ask you a question about that? Why is the 642 easier in that situation? What makes it easier?

[B]

When you have an estate, you can use a set aside deduction. Think of it as a super accrual method.

[A]

Oh, right, the set aside.

[B]

Like I could accrue my electric bill for the next 20 years accounting. Right. But if I have an estate of $15 million and eventually all the income is going to charity and it's going to be a five or ten year administrative process because all kinds of complexity. I can take those charitable deductions up front if I have it set aside where if I'm in a revocable trust administration, I really can't use that rule. I'm going to get at best a one year accrual.

[A]

Yeah. And really the that's where the time value of money is so powerful and being able to utilize the time in the fashion that best serves your client is so valuable here. What's your third item, Bob? I'm interested.

[B]

This is super complex. We'll go right to the deep end of the pool. There is a case called Kennan May 1940 Second Circuit, but it applies across the country. And when you have a pecuniary funding clause, you're required to recognize gain. So if my will says I leave $15 million to a bypass trust and we fund it with appreciated securities carry, we have to recognize the gain. That's simple. Nobody argues that when you have a trust, a trust, not an estate, you're required to recognize the gain, but you're not allowed to offset the gain with losses. However, when you have an estate, the law specifically allows you to net the gains and losses. And that's why a 645election is such a useful tool which solves that netting problem.

[A]

I'm going to wear my floaties here. And if you need it listener, there are additional resources in the show notes about Kennan and we did a podcast with Bob that was right on this topic and so feel free to dive deeper into that one. And we want to make sure that you understand it deep. Bob, you have a fourth reason. I can't wait to hear it.

[B]

And then S corporations we Talked about S Corps 642 Overall, the fiscal year deferral and then finally the KEN and gains and losses. So those I think the last point is that fiscal year deferral and you've

[A]

often talked about the first year after death as one of the most important tax planning windows families ever experience. And now I see why. So if we're looking at the broader post death planning strategy, how does the 645 election fit in? Let's put that in parallel with basis adjustments, retirement account decisions and timing of asset sales. Now put that into the context in the landscape for us as we're making the bigger decisions.

[B]

Sure. The roll around here is that every trust administration after somebody dies is supposed to make his 645 election unless I give my permission to do something different. Okay. We're just automatically going to check that little box.

[A]

Well Bob, not every practice has you sitting in the back office making sure everything's right. So help us figure it out and pretend I am a new practitioner kind of young in the business. It's just me if everything is 645 unless you approve it for otherwise. When are the exceptions from the 6:45 election? Let's try to tackle it that way.

[B]

Very rare exceptions.

[A]

I love that answer though that it rarely comes up. And let me just put in a plug for our champions, our PFP champions. If you're listening right now, the default that Bob is really encouraging you to have is to choose the 645 election. But if you have a particular situation, one of those rare situations that Bob is talking about where maybe this is not the right fit, that's when you want to lean on your personal financial planning community. We have two ways for you to do that. You can look up a PFP champion in your state and ask them, send them an email. Second way is connect on Engage 365. It's our community of practitioners and simply ask the question there. Allow people like Bob and others who have a history and experience in working in this help you when you're faced with that particular situation. Bob, how does that sound as a decent solve to win, not to use the 645election?

[B]

I think that's right. I think thinking about that question Kerry, where you might not make it is if you wanted the estate and the trust to be truly separate legal entities for purposes of owing the government. For example, if something was happening in my estate which would cause my estate to basically be insolvent bankruptcy, but somehow my revocable trust escaped that bad result, I might want to keep those as separate legal entities.

[A]

Okay, so let me put that into something I've seen in the past. Maybe you have a business asset that has a lawsuit pending that could bankrupt that particular asset. Would that be a situation where perhaps you'd want to keep them separate?

[B]

I think so. I think it's going to jump off the page. If you have a situation like that, you're going to have so many lawyers and CPAs in the room that somebody will catch it?

[A]

Absolutely. Well, Bob, I love this deep dive into a very technical aspect, but one clearly that gets used every time that you are looking at the opportunity to use it. So thank you so much for sharing with our community of listeners. And again, if you want deeper resources, go to the AICPA PFP section. In fact, not only for this topic, but others. If you want to deliver premier financial planning with confidence, consider exploring everything the AICPA PFP section has to [e-mail] For 269 a year, AICPA members can get access to a library of technical guidance, webcast planning tools, and expert insights, all designed to help you serve your clients at the highest price level. And if you're a CPA with 3,000 hours of financial planning experience already, you probably want to consider showing your expertise next to your name by obtaining the PFS [e-mail] PFS this is our podcast together. If this episode helped you in your practice, share it with your professional community. Especially if you're talking to a colleague just starting their 645election or thinks that they have a situation where they need to decide, this would be the episode to share. With almost 600,000 downloads so far, the AICPA PFP podcast is helping to advance the profession one listener at a time. This has been Kerry Sinnett for the AICPA Personal Financial Planning Division. Big thanks to Bob Keebler, as always, and to you. Thanks for listening. Until next time, keep earning trust through clarity, guiding with compassion, and delivering premier planning that elevates our profession

[C]

this content is designed to provide illustrative information with respect to the subject matter covered and does not represent an official opinion or position of the aicpa, the association, or cema. It is provided with the understanding that they are not engaged in offering legal, accounting or other professional services. If such advice or expert assistance is required, the services of a competent professional person should be sought. The aicpa, the association and CIMA make no representations, warranties or guarantees as to, and assume no responsibility for the content or application of the material contained herein, and especially disclaim all liability for any damages arising out of the use of, reference to, or reliance on such material.