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Estate Tax - Estate Tax Filing Requirements

Estate Tax Filing Requirements
The executor of any gross estate valued at more than $5,340,000 (for tax year 2014) must file a Form 706 (U.S. Estate Tax Return). The return should still be filed even if the applicable exclusions and deductions bring the taxable estate below the $5 million threshold. For 2014, the maximum estate tax rate is 40%.

The estate tax return is due nine months after the date of death, unless an extension request is filed.

The Alternate Evaluation Date (six months after death) can be selected if two conditions are met:
1) Gross estate must be worth less than the date of death value
2)Tax liability must be less than the tax liability due using date of death calculation The Gross Estate
The gross estate is the total fair market value (FMV) of all property for which the deceased has an interest at his or her death. The gross estate includes all property BEFORE subtracting for deductions, debts, credits and administrative expenses.

  • Inclusions
    The following items are included as part of the gross estate:
    -
    Physical property (autos, boats, houses, clothes, furniture, pets, etc…)
    -
    Cash and securities
    -
    Investment accounts (savings, CD's, brokerage, etc…)
    -
    Retirement accounts (IRA's, annuities, 401k, pensions, etc…)
    -
    Life insurance proceeds (for policies owned by decedent)
    -
    Gift tax on gifts made within three years of death
    -
    Life insurance with ownership change within three years of death
    -
    Certain gifts made within three years of death
    -
    One-half of jointly-owned property with spouse
    -
    Assets in joint tenancy with non-spouse (subject to consideration test)
Look out!
Three-year rules:

Transfers made within three years of death for the following WILL be included in the gross estate of the decedent:

- Transfer of ownership of life insurance
- Gift taxes paid on gifts
  • Exclusions
    The following items are excluded from the gross estate of a decedent:
    -
    Property owned by the spouse or other individuals
    -
    Completed lifetime gifts
    -
    Property for which the decedent had no control
    -
    One-half of jointly owned property with a spouse
    -
    Contribution amount by non-spouse's for jointly-owned assets "consideration test"
    -
    Life insurance policies where the decedent has no ownership (after three-year period)

"Consideration Test or Contribution Rule"
The gross estate will include the entire amount of jointly-owned property (non-spouse), reduced only by the amount that can be clearly identified by the surviving non-spouse joint owner(s) as their contribution to the property.

Deductions
Certain deductions are allowed from the gross estate in order to determine the adjusted gross estate. Such deductions to the gross estate include the following:

- Funeral expenses
- Casualty losses
- Court costs
- Debts against the estate
- Taxes
- Mortgages
- Administrative expenses (fees for an attorney, accountant, appraisals, executor and asset dispositions)

Adjusted Gross Estate

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