Final Estate Tax Return

While the federal estate tax doesn’t apply to most estates, there are certain situations where the final estate value is greater than expected. One such case happens when large monetary gifts were given to family members before death. If you have received a large amount of money during your lifetime and are now passing it down to your heirs, the estate taxes can exceed your expected sum. In some cases, the estate may also be subject to an Estate Tax Refund. This is when the IRS will return part or all of the owed tax back to the beneficiary or beneficiaries.

Before signing on the final estate tax return, it is important for individuals to remember several important facts. First, the beneficiary or beneficiaries must understand that they will not receive the full amount of inheritance, as requested in the final will. Estate taxes are not based on ability to pay, but on fair market value. If this is in dispute, a neutral party should be consulted. Second, while estate taxes are owed by the beneficiaries, the IRS has the authority to order a refund if the beneficiaries fail to pay their share.

When preparing the final estate tax return, remember to report any UDRs, or, “unlike” property and bank accounts. The IRS has a list of the proper items to be reported on the final return, but the process can be confusing if the individual doesn’t have a clear idea of what the bank account is meant to mean. For example, UDRs refer to real estate owned, while bank accounts typically refer to checking or savings accounts.

Once all the necessary documents are received from the estate, the individual may need to pay an additional fee to the IRS. This fee may be a reasonable charge, to ensure the proper preparation of the final estate tax returns. Remember, this filing may become essential when estate planning proceedings come to a conclusion and a will is prepared and signed. If no will exists, or if the person isn’t sure about the proper document setting forth the distribution of his or her property and assets, it may be wise to consult with a probate lawyer to determine what will happen to the deceased person’s assets should that person no longer be living. The probate lawyer can provide a helpful perspective during the estate-planning process.

Taxes are often a fact of life, and not only are they expected when one dies, they must be paid. As property and casualty insurance policies are adjusted to the rates of the final tax rates, estates and individuals must reevaluate their projections of future taxable income. With the increase in taxes, it may be more difficult to plan for the death of the insured. Although estate and casualty insurance may be purchased to protect the policyholder’s loved ones from future taxable events, it may not adequately provide the means to pay these premiums.

Estate tax rates are based on a number of factors including current market value, date of death, size of estate, and state of residence. Although a majority of individuals die within the United States, it is also true that many people abroad die subject to foreign taxation. U.S. citizens who have lived abroad usually benefit from the special overseas exception under the law. Individuals should always review the final estate tax return in detail to identify any areas of potential audit. This will help ensure the smoothness of the estate administration process after the death of the insured.

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Long Beach, CA, 90807
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