Estate Tax and Gift Tax

 

Estate Tax

The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death . The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your “Taxable Estate.” These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify.

After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit.

Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $5,430,000 in 2015, $5,450,000 in 2016, $5,490,000 in 2017 and $5,600,000 in 2018.

Beginning January 1, 2011, estates of decedents survived by a spouse may elect to pass any of the decedent’s unused exemption to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse. Note that simplified valuation provisions apply for those estates without a filing requirement absent the portability election. 

When To File

You must file Form 706 to report estate and/or GST tax within 9 months after the date of the decedent’s death. If you are unable to file Form 706 by the due date, you may receive a six month extension of time to file.
Where to File File
Form 706 at the following address.
Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999
If using a private delivery service, send Form 706 to the following address.
201 W. River Center Boulevard Covington, Kentucky 41011
Attn: Submission Processing, Stop 31
Other reminder:
U.S. Citizens or Residents; Nonresident Noncitizens
File Form 706 for the estates of decedents who were either U.S. citizens or U.S. residents at the time of death. For estate tax purposes, a resident is someone who had a domicile in the United States at the time of death. A person acquires a domicile by living in a place for even a brief period of time, as long as the person had no intention of moving from that place.
Decedents who were neither U.S. citizens nor U.S. residents at the time of death, file Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, for the estate of nonresident not a citizen of the United States