U.S. 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 $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 and 2011 (note: there are special rules for decedents dying in 2010); $5,120,000 in 2012, $5,250,000 in 2013, $5,340,000 in 2014, $5,430,000 in 2015, $5,450,000 in 2016, $5,490,000 in 2017, $11,180,000 in 2018, and $11,400,000 in 2019.


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. 

United States Estate TAX of nonresident not a citizen of the United States

What's New

Various dollar amounts and limitations in the US Estate Return are indexed for inflation. For decedents dying in 2018, the following amounts are applicable.

  • The basic exclusion amount is $11,180,000.
  • The ceiling on special-use valuation is $1,140,000.
  • The amount used in figuring the 2% portion of estate tax payable in installments is $1,520,000.
  • The basic credit amount is $4,417,800.

Purpose of Estate Tax Return Filing

The executor of a decedent's estate uses estate tax return to figure the estate tax imposed by Chapter 11 of the Internal Revenue Code. This tax is levied on the entire taxable estate and not just on the share received by a particular beneficiary. Estate tax rerturn also is used to figure the generation-skipping transfer (GST) tax imposed by Chapter 13 on direct skips (transfers to skip persons of interests in property included in the decedent's gross estate).


Which Estates Must File

For decedents who died in 2018, Form 706 must be filed by the executor of the estate of every U.S. citizen or resident:

  • Whose gross estate, plus adjusted taxable gifts and specific exemption, is more than
  • $11,180,000; or
  • Whose executor elects to transfer the DSUE amount to the surviving spouse, regardless of the size of the decedent's gross estate. See the instructions for Part 6—Portability of Deceased Spousal Unused Exclusion, later, and sections 2010(c)(4) and (c)(5).

To determine whether you must file a return for the estate under (a) above, add:

  1. The adjusted taxable gifts (as defined in section 2503) 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 as of the date of death.

When To File

You must file estate tax return to report estate and/or GST tax within 9 months after the date of the decedent's death. If you are unable to file it by the due date, you may receive an extension of time to file. Use the Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to apply for an automatic 6-month extension of time to file.

United States Estate (and Generation-Skipping Transfer) Tax

The estate tax is imposed on the transfer of the decedent's taxable estate rather than on the receipt of any part of it.


Who Must File

The executor must file Estate Tax Return if the date of death value of the decedent’s U.S.-situated assets, together with the gift tax specific exemption and the amount of adjusted

taxable gifts, exceeds the filing threshold of $60,000. The gift tax specific exemption refers to the amount allowed for gifts made by the decedent between September 9, 1976, and

December 31, 1976, inclusive. The amount of adjusted taxable gifts refers to the amount of adjusted taxable gifts made by the decedent after December 31, 1976.


When To File

File Estate Tax Return within 9 months after the date of death unless an extension of time to file was granted. If you are unable to file it by the due date, file the Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to apply for an automatic 6-month extension of time to file. 


Penalties

Section 6651 provides for penalties for both late filing of returns and late

payment of tax unless there is reasonable cause for the delay. There are also penalties for willful attempts to evade or defeat payment of tax.