When Is an Estate Tax Return Due?

Jun 24, 2014

The federal estate tax can be an issue for high net worth individuals. There is a federal estate tax credit or exclusion. If your assets do not exceed this exclusion amount, you do not have to worry about the estate tax. Those who are exposed to the estate tax must file a federal estate tax return.

In 2014, the amount of the federal estate tax exclusion is $5.34 million. The maximum rate of the tax is 40 percent.

IRS Form 706

If the estate tax is applicable, a representative of the estate must file Internal Revenue Service Form 706 within nine months of the decedent’s passing. The taxes that are due must be paid within this time frame as well. However, you can get an automatic six-month extension if you need more time. To request the extension, you would file IRS Form 4768.

The form must be filed if there are taxes due, but there can be other reasons to file Form 706.

Estate Tax Exclusion Portability

The estate tax was repealed during the 2010 calendar year due to provisions contained within the Bush era tax cuts. There was a lot of uncertainty during that year with regard to the future of the estate tax.

During the month of December of 2010, a piece of legislation was passed called the the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Provisions contained within this act defined the estate tax parameters that would be in place for 2011 and 2012.

Prior to the passage of this act, the estate tax exclusion was not portable between spouses. In an estate planning context, the term “portability” refers to the ability of a surviving spouse to use the estate tax exclusion that was allotted to his or her deceased spouse.

This legislative measure made the estate tax exclusion portable in 2011 and 2012.

The 2010 tax relief act was scheduled to expire or sunset at the end of 2012. There were no guarantees with regard to ongoing portability until the passage of the American Taxpayer Relief Act of 2012. This is the act that helped us avoid the so-called fiscal cliff.

This act made portability of the federal estate tax exclusion permanent. However, portability does not kick in automatically. To opt in, a representative of the estate must file IRS Form 706, even if no estate tax is due at that time.

Estate Tax Efficiency Strategies

When you are planning your estate, you should certainly inventory your assets so that you can determine whether or not you are exposed to the federal estate tax. If the value of your estate exceeds the amount of the exclusion, there are steps that you can take to mitigate your exposure.

The optimal course of action will vary on a case-by-case basis. If you would like to discuss your unique situation with a licensed estate planning attorney, contact us to schedule a free consultation.





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