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Julie Garber

When is a Federal Estate Tax Return Required to be Filed?

By April 14, 2009

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NOTE: The information below only applies to the estates of people who died in 2009. For filing requirements for deaths that occurred in 2010, 2011, 2012 or 2013, please refer to the following:

In honor of tax day tomorrow, here is the information necessary to determine if a federal estate tax return, United States Estate (and Generation-Skipping Transfer) Tax Return, or IRS Form 706, must be filed for decedents dying in 2009.

Form 706 must be filed for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $3,500,000. To determine whether a return must be filed, add:

  1. The adjusted taxable gifts (under section 2001(b)) made by the decedent after December 31, 1976;
  2. The total specific exemption allowed under section 2521 (as in effect before its repeal by the Tax Reform Act of 1976) for gifts made by the decedent after September 8, 1976; and
  3. The decedent's gross estate valued at the date of death. (See Instructions for Form 706 for additional information.)

So what this means today is that any gross estate valued at more than $3,500,000 must file a Form 706, even if no federal estate tax will be owed after applicable deductions and tax credits have been applied. And when are the return and payment, if any, due? Nine months after the decedent's date of death - but refer to the link to the instructions for Form 706 with regard to extensions of time to file the return and pay any tax due.

Even so, some estates that aren't required to file a Form 706 should still consider filing one to lock in the date of death fair market values of the estate assets. This includes estates that utilize AB Trust or ABC Trust planning where only the B Trust or B and C Trusts will be funded and estates that create lifetime trusts for nonspouse beneficiaries. Why? Because it will be much easier to settle the estate of the surviving spouse or nonspouse beneficiary when they later die since the starting fair market values and step up in basis of the estate assets wil be clearly stated on the initial decedent's Form 706. Imagine trying to settle the estate of a beneficiary 5, 10, 15 or 20 years after the person who the beneficiary inherited their estate from died. Not fun.

Comments
April 14, 2010 at 8:44 pm
(1) Diane says:

I am the estate administrator for an uncle who died in July 2008. The estate still has not been settled, due to pending class action payments that will be added to the estate.

Does the estate need a 2009 federal tax return filed?

April 14, 2010 at 10:46 pm
(2) Julie Ann Garber, Esq. says:

Hi Dianne, if the estate earned more than $2,200 of income during the course of the year, then the estate should file a 2009 IRS Form 1041, U.S. Income Tax Return for Estates and Trusts.

Sincerely yours,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
http://wills.about.com
wills.guide@about.com

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal or tax advice, please consult with an attorney or an accountant.

May 20, 2010 at 3:32 pm
(3) SD says:

I am the administrator for an estate. The estate received 401K and Pension funds from a divorce settlement. When the lump sum payments were made, federal and state taxes where withheld.
Do I have to wait until 2011 to file taxes, obtain any refund and close the estate?
If not, how do I get the IRS and the state to refund any funds due back to the estate.

Thank you!

May 22, 2010 at 5:12 pm
(4) Julie Ann Garber, Esq. says:

Hi SD,

In order to receive tax refunds, the estate will most likely be required to file an IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, for the year in which the monies were received, as well as any applicable state income tax form. Consult with an estate tax attorney or accountant in the state where the estate is being administered to be sure.

Sincerely yours,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
http://wills.about.com
wills.guide@about.com

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal or tax advice, please consult with an attorney or an accountant.

June 10, 2010 at 4:52 pm
(5) Mili says:

Hi, I filed a 1040ez form, but when i receantly got my check, the amount was only from federal taxes..
Do i have to file anything else for STATE taxes? or is it that i have to wait for the second check?
thank you

June 13, 2010 at 10:44 am
(6) Julie Ann Garber, Esq. says:

Hi Mili, did you file a state income tax return? If not, then you need to file one for your state as well in order to claim a state refund since your federal return is not connected to your state return.

Best of luck.

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
http://wills.about.com
wills.guide@about.com

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal or tax advice, please consult with an attorney or an accountant.

June 28, 2010 at 12:02 am
(7) Andrea says:

Hi Julie,

The probate court inventory list of my uncle’s estate contained only 2 homes and some U.S. savings bonds, because every other annuity/CD he possessed had named beneficiaries or P.O.Ds.
For form 706, do I need to list even those things that were outside probate? Wouldn’t it be a problem if the two documents didn’t match?
Thanks!

June 28, 2010 at 7:20 am
(8) Julie Ann Garber, Esq. says:

Hi Andrea, yes, the CDs and annuities and any other non-probate assets should be included on the estate tax return. The probate inventory only has to include assets that have to be probated, not every single asset that a deceased person owned when they died.

This article explains what is included in someone’s estate for federal estate tax purposes:

How to Calculate the Value of Your Gross Estate

Best of luck.

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
http://wills.about.com
wills.guide@about.com

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal or tax advice, please consult with an attorney or an accountant.

July 31, 2010 at 1:41 pm
(9) Al says:

Hi Julie,
Thanks for posting this information as it has been very helpful.

Question: I am the successor trustee of a trust. There is also an attorney appointed as PR for a will that contains items that were not transferred into the trust. That said are there two separate 1041 filings in this case one for the probated will and the other for the trust? Also, for the trust a 706 is going to be required.

Thanks again!

July 31, 2010 at 4:07 pm
(10) Julie Ann Garber, Esq. says:

Hi Al, assuming separate tax ID numbers have been obtained for the probate estate and trust, then two different 1041s will be required.

Best of luck.

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
http://wills.about.com
wills.guide@about.com

The information contained in this comment is not legal or tax advice and is not a substitute for legal or tax advice. For legal or tax advice, please consult with an attorney or an accountant.

February 3, 2011 at 1:35 am
(11) James says:

My father passed in Feb 2009. The probate opened in May 2009 and completed in Sept 2010. In 2009 we filed a final tax return for my Dad but no estate return. The total estate was less than $500k. I inherited the house that I’m now living in. I paid the mortgage payment for all of 2009 (I was actually living here prior to his death.) I was unable to complete an assumption on the mortgage prior to the end of 2010 so the 1098 shows the estates tax id as recipients fed id no and my dad’s social as payers social sec no. Is there any way that I can get credit for the 1098 since the estate shows I inherited the property, the title was transfered to me and I made the payments for the entire year?

Thank you!

February 7, 2011 at 9:35 pm
(12) Marcus says:

Hi Julie, same situation as James has … Father passed away in 2006 and his house remains in his name and estate and the 1098 comes to me. His name and ssn is on the 1098 but I have been making the payments … Can I claim that interest?

Thanks
Marcus

February 8, 2011 at 7:58 pm
(13) William Perez says:

James and Marcus, You may be able to deduct the mortgage interest and property tax that you paid for the property under the rules regarding beneficial or equitable ownership. This rule addresses two separate issues: when a person might have title to the property but isn’t listed on the bank loan as a borrower, and when a person has all the benefits and burdens of ownership but isn’t listed as an owner on the property’s title.

William Perez
Guide to U.S. Tax Planning
http://taxes.about.com
taxes.guide@about.com

February 11, 2011 at 12:16 am
(14) Jen says:

Hi there-
My mom passed in 2006, I filed a 1041 for the estate. It never went through probate and there was money left in a checking account for the beneficiaries, it made a minimal amount of interest. The house just sold through short sale at a loss in October and the money in the checking account distributed. Do I need to file anything else now? What about a schedule K1?
Thanks

February 13, 2011 at 4:52 pm
(15) Julie Ann Garber, Esq. says:

Hi Jen, you need to consult with a tax attorney or an accountant who is familiar with the income tax laws of your state that govern estates as well as federal income tax laws that govern estates to be sure.

Best regards,

Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com

April 12, 2011 at 10:18 am
(16) Steve says:

My father-in-law passed away in December of 2008. His house had been placed in a revocable trust several years before he died (my wife and her sister were the trustees). The house was the only thing in the trust so the trust had no income. The house was sold in June of last year (to another family member) at below appraised value. The value of his entire estate was below $200,000 (including the house). Is it a requirement to file a tax return for the trust?

July 2, 2011 at 2:34 am
(17) Tim says:

How and when does the IRS find out an individual is a beneficiary of an AB trust? Is it when the trust is created, when tax returns are filed for the decedent and/or trust, or when the beneficiary takes an actual distribution from the trust?

January 30, 2012 at 11:32 am
(18) Candy says:

I am a receipient of inheritance of property from my Grandfather who died in 1985 in Florida. His spouse who never filed a transfer on the property from him died last year – she was never on the property but lived there till she died. Her son, my sisters and I inherited the property this year 2011. Property has been sold. I received a 1099 for my share (1/9th) – I live in Georgia – the amount being less than $8000.00. Property sold for total of $75,000.00. Since no “Basis” is available (Tax assessors don’t go back to 1985 on the property) – How do we establish a “basis” for reporting and filing the 1099? The property was transferred to us in 2011 prior to selling it later in 2011. Status Homestead real property – but no value was entered on the final documents I received. Would we use the appraised Just Market Value at the time we were granted the property as documented at the Tax Assessors office OR the Cap Diff/Portability Amt noted OR the amount documented under Exemptions?

May 30, 2012 at 10:39 am
(19) Bruce says:

I have been named a personal representative in my recently deceased mother’s will. Her entire estate is valued at less than $200k. I am receiving checks for previously prepaid insurance and hospice care that are being made payable “To the estate of . . .”. The bank where my mother maintained her account is requiring that I get a “letter of testamentary” from the county courts before they will negotiate the checks. This will require that I probate the will at a cost greater than the checks I will be receiving, and establish an estate. The county clerk states that this is not required by Tennessee state law. Is there a way to be able to negotiate these checks without establishing the estate?

May 30, 2012 at 8:10 pm
(20) Julie Ann Garber, Esq. says:

Hi Bruce, please accept my condolences on your loss. You need to consult with a Tennessee probate attorney who will be able to advise you as to the steps that need to be taken in order to be able to negotiate the refund checks. Unfortunately, as you suggest, the legal fees may end up exceeding the value of the refund checks.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

September 22, 2012 at 7:25 pm
(21) Dominick says:

My mother died in Florida with a will.
Within her estate is a car. I would like to sell the car and put the money into the estate since the car’s value is depreciating.
My sister, who is the executrix, wants to wait until all taxes/creditors obligations are fulfilled and then dispose of the car.
How can I explain to her it’s OK to sell the car?

September 23, 2012 at 10:20 am
(22) Julie Ann Garber, Esq. says:

Hi Dominick, please accept my condolences on the loss of your mother. As the executrix, your sister needs to consult with a probate attorney in the state where your mother lived in order to determine the best course of action with regard to settling your mother’s estate. This article explains the general steps involved in settling an estate:

Step by Step Guide – How to Settle an an Estate

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.
About.com is part of the New York Times Company

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

October 2, 2012 at 7:06 pm
(23) ultima56 says:

The 706 instructions say precious little about AB Trust disclaimers. If according to the instructions one is not required to submit a return, does that mean the decedent’s exemptions is lost and his or her entire estate moves to the surviving spouse? In other words, must one document the use of the exemption on form 706 or give it up in the context of an AB trust?

October 3, 2012 at 8:21 am
(24) Julie Ann Garber, Esq. says:

A disclaimer must be valid and “perfected” under applicable state and federal law. Aside from this, the A and B Trusts would obtain separate taxpayer identification numbers and file separate income tax returns. But even if the 706 instructions state that a return is not required, it may be a good idea to file one in order to document date of death values and what has been funded into the A vs. B trust: Learn When to File IRS Form 706 (see the last section of this article, When Should a Nontaxable Estate Consider Filing Form 706?).

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal or tax advice and is not a
substitute for legal or tax advice. For legal advice, please consult with an
attorney. For tax advice, please consult with an accountant or tax attorney.

November 1, 2012 at 6:20 pm
(25) Ultima56 says:

Under well-established tax rules, a beneficiary receives an asset at its current value, or with a “step-up” in basis, instead of at its value at the time the decedent had acquired it. In order for the beneficiary to receive the stepped-up basis, though, the asset must be passed via the decedent’s estate. When dealing with AB trusts, however, assets in the “A” trust (set up to pass to beneficiaries estate-tax free) are not included in the decedent’s estate; therefore, the beneficiaries lose that stepped-up basis.

Does this mean one cannot avail oneself of the stepped up provision unless he or she is willing to forgo a living AB trust and faced up to probate?

November 3, 2012 at 4:19 pm
(26) Julie Ann Garber, Esq. says:

Ultima56, it is the “B” trust in an AB Trust plan that passes to the final beneficiaries free from estate taxes after the second spouse’s death, not the “A” trust: What is an AB Trust? With that said, the estate tax rate is currently 35% and the capital gains rate is 15%, so the trade off is to save on estate taxes by establishing an AB Trust plan and worrying about capital gains taxes when and if assets are later sold.

Best regards,

Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

March 13, 2013 at 9:06 pm
(27) Missy says:

Hi Julie.

I’m in the process of finalizing my mother’s estate. The Form 1040 & 1041 have already been filed for 2012. My question is does my lawyer have to finish probate before the required 706 is filed, or does the 706 have to be filed before probate is complete? Thank you for any helpful information.

March 16, 2013 at 8:50 am
(28) Julie Ann Garber, Esq. says:

Hi Missy, please accept my condolences on the loss of your mother. Where did your mother live at the time of her death? This is a state law question, since in Florida a
probate estate cannot be closed until the personal representative has received the estate tax closing letter from the IRS. If your mother was not a Florida resident, check with your probate attorney to determine the probate rules of the state where your mother lived.

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

April 13, 2013 at 1:55 pm
(29) Robin says:

My mother died in NC in Sept of 2011 without a will and the only property was a home with a mortgage. The estate had $0 and was a simple probate. As the administrator, I did not file estate taxes due to no income. The mortgage on the home is still in the name of the estate but in 2012 my bother and I rented it and made the mortgage payments on behalf of the estate.
Is it correct to file a 1041 return under the estate tax ID for the rental income? If we keep the home in the name of the estate, do we submit the 1041 each year?

April 14, 2013 at 9:17 am
(30) Julie Ann Garber, Esq. says:

Hi Robin, please accept my condolences on the loss of your mother. You will need to consult with an accountant who is familiar with NC and federal income tax laws that apply to the estates of deceased persons, particularly in view of the new 3.8% surtax on income earned by estates and trusts that went into effect on Jan. 1, 2013: Individuals, Executors and Trustees – Are You Ready for the 3.8% Medicare Surtax?

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
email: willsguide@gmail.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

April 16, 2013 at 8:45 am
(31) MM says:

Do I need a tax ID number to open an estate bank account? My father lived in VA and from what I read there is no estate tax or inheritance tax in VA. What is the point of getting a tax id number for the account?

Thank you.

May 2, 2013 at 7:56 am
(32) william says:

my mom recetly passed in PA what little she had left in the bank was titled itf for me n my sister. There is no other assets. Is there anything we need to do?

May 2, 2013 at 12:28 pm
(33) Julie Ann Garber, Esq. says:

Hi William, please accept my condolences on the loss of your mother. You need to consult with an estate lawyer in PA in order to determine if there is anything that needs to be done. If you need help finding an estate lawyer, this article should help: 7 Tips for Finding an Estate Planning Attorney.

Best regards,

Julie Ann Garber, Esq.
Attorney, The Andersen Firm, A Professional Corporation
Guide to Wills & Estate Planning
http://wills.about.com
email: willsguide@gmail.com
About.com | Need. Know. Accomplish.

The information contained in this comment is not legal advice or tax advice and is not a substitute for legal advice or tax advice. For legal advice please consult with an attorney, and for tax advice please consult with an accountant or tax attorney.

June 3, 2013 at 10:16 am
(34) Robyn says:

Hi I am the executor over my sisters estate. She passed away 7/28/2011. I filed her 2011 return in 2012. When recently going through paperwork I found one misc 1099 form for 2012 for her. It was received from paying medical bills of hers from our Indian reservation. The return is pretty significant. How do I go about filing a final return for her since I already filed one in 2012 for her also? When trying to use turbo tax (which is what I always use) it will not let me move past the date of death since it is 2011 , and not 2012. I do believe I need to file a form 1041. But am thinking I cannot do that using turbotax? Which I wish I could because all I have to file is one 1099-Misc form.

October 8, 2013 at 2:18 pm
(35) Crystal Daniels says:

Hello i’m just curious to know my mom passed away in 1996 and I’m just curious to know is it to late to file her income taxes.

March 15, 2014 at 1:31 pm
(36) Wayne Cushing says:

I’ve got a dilemma that I hope you can help me with. My next door neighbor’s husband died 6/10/12. In March of 2013 she received a check for $15,000 which was made out to the Estate of her late husband. I took the check to the bank for her and they deposited it into her checking account. I have a document dated in 1996 that shows she was the beneficiary so it appears that the Annuity company made a mistake and should have made the check out to her and not to the Estate. So the question is do I need to do an income tax return for the estate or can I just do one for her and write a letter to the IRS explaining that the check should have been made out to her

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