Managing family succession or assets placed in trust? We can help minimize the tax burden
The last thing you want to worry about after losing a loved one is whether you’ve filed their estate taxes correctly. Positive Rate can help ensure that everything is filed correctly and on time, so you don’t have to worry about the changing tax laws.
There is a common misconception that estate and trust tax returns are just for the very wealthy.
When an elderly parent dies, their assets and tax reporting requirements pass on to their adult children. The decedent must file a final tax return in the year of death if their income exceeds the filing limit for that year.
Many times the parent’s assets, such as rental property, stocks or bonds, will continue to produce income after their death. If that income exceeds $600, the decedent’s estate must file a tax return.
There may also be a trust in the estate plan, which would have it’s own tax reporting requirements. Typically, one of the children becomes the fiduciary of the estate and/or trust and would be required to manage the assets, distribute income, and file the necessary federal and state tax forms.
This is a very sensitive and challenging position and comes at a difficult time. We have helped many of our clients through these situations.
your estate tax advisor
When an individual dies, their final individual tax return is used to calculate the estate tax. This tax is imposed on the value of the decedent's property, which is determined by subtracting any debts and liabilities from the total value of their assets.
Form 706(estate tax return) is used to calculate the estate tax, which is a tax that is levied on the value of an estate. It addresses the assets of an estate, and it includes: bank accounts, real estate, IRAs, Roth IRAs, pensions, annuities, and stocks.
Form 1041(Income Tax Returns for Estates & Trust) reports the income of an estate or trust, as well as any deductions, gains, or losses. The form is also used to report the distribution of the estate or trust's assets.
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Our team of qualified accountants are here to help you prepare your estate and trust tax returns. Give us a call today or schedule a free consultation to learn how we can help ensure your estate & trust taxes are filed properly on time and efficiently.
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An income tax return for estates and trusts (form 1041) must be filed if a decedent’s estate earned more than $600 in a year. An Estate Tax Return (Form 706) must be filed if the decedent’s estate exceeds the current threshold for filing or if the estate elects to transfer any deceased spousal unused exclusion (DSUE) amount to a surviving spouse, regardless of the size of the gross estate or amount of adjusted taxable gifts. The election to transfer a DSUE amount to a surviving spouse is known as the portability election.
A final tax return (form 1040) is filed for the calendar year in which the taxpayer died. If I’m subsequent years, the estate of the decedent earns more than $600, the estate administrator must file a tax return for estates and trusts (form 1041).
The IRS will issue the ETCL (Letter 627) when it has received and accepted the estate tax return (form 706). All requests for Estate Tax Closing Letters must be made through the pay.gov ETCL request form and will be issued only to the executor and specific others.
Yes, as of 2015 IRS transcripts are acceptable in lieu of ETCL. Tax professionals can help obtain these transcripts online.
Fair Market Value is the value of the assets on the date of death. This is the metric used to determine the amount of the Gross Estate.
If the administrator needs more time to file, use form 7004 to apply for an automatic five-month extension to file.
The “Gross Estate” includes cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
Deductions from Gross Estate 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.
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.”
We would be happy to assist you with filing form 7004 to apply for a five-month extension.
The basis of Real property “steps up” in value to the fair market value on the date of death. You may owe tax on the difference between the sale price and the property’s basis.
Business and farm assets are included in the Gross Estate at fair market value.
Whether in-person or fully virtual, we will take the time to understand your unique situation and give you a best-in-class, personalized experience. We understand that taxation touches every part of your financial life and stand ready to help year-round.