Estate Question

[mcbreck]

Estate has a value of about $11m, well below the $13.6m threshold for it being taxable but very substantial. I'm told there were no previous gifts to lower that threshold, no generation skipping and no marital issues to deal with. Everything is in a trust, an IRA and some real estate - non-rental.

 

Would you file an estate tax return? I don't think it has to be filed but the executor is interested in doing so and it is going to generate a substantial bill for he, me and the attorney (there would likely be multiple hours of billable meetings as we've already had a few).

 

Thoughts?

[jklcpa]

Is this a married couple or a single person? In other words, is there any reason to protect the portability of estate tax exemption of the deceased for a spouse, if there is one, since we don't know if the exemption will actually revert back to pre-TCJA levels after 2025?

[BulldogTom]

26 minutes ago, jklcpa said:

Is this a married couple or a single person? In other words, is there any reason to protect the portability of estate tax exemption of the deceased for a spouse, if there is one, since we don't know if the exemption will actually revert back to pre-TCJA levels after 2025?

As usual, Judy hit the most important question...

Tom
Longview, TX

[Catherine]

I had an estate here in MA that was close to the MA $2M exemption amount, and got this question from one the Executor. Exec is a nervous nelly, so I called MassDOR's estate tax unit and asked directly. Their answer was "If it doesn't exceed the limit, we don't want to see a return." Even if it's nothing, they still have to look it over and process it. 

But that was a state, not the IRS, that I spoke with.

[mcbreck]

19 hours ago, jklcpa said:

Is this a married couple or a single person? In other words, is there any reason to protect the portability of estate tax exemption of the deceased for a spouse, if there is one, since we don't know if the exemption will actually revert back to pre-TCJA levels after 2025?

As I wrote, no marital issues to deal with as the spouse died 20 years ago. I think after having a few meetings, everyone will agree to just document the valuations and ignore the return but we'll see.

 

[Medlin Software, Dennis]

I think you may have the answer in the OP. "generate a substantial bill for he"

Many admins will look at raising their bill. I have also seen this while JD shopping too (suggest they will do everything possibly allowed, even when not required, to pad their statute-controlled bill). It is relatively easy to do, max statute controlled fees, unless there is some sort of oversight by an interested party, but I suspect complaining would cost the state/heirs too, since filing the return may not be legally wrong.

On the other hand, this may be a not always unwise CYA, so this does not come back to cause more expense down the road, as defending the non-filing has a cost, even if proven correct.

My thoughts come from handling three estates, and the latter two being complicated/intertwined. The other heirs were fine with me handling things, I found a competent local to the probate court JD firm, and we dealt with complicated real property and heir issues as a "team" (me and the JD firm).

[BrewOne]

advocating for the preparation of a 706 could give the appearance of self-interest, so it is best that the decision comes from the executor, who should be informed of an estimated cost.  There are not a lot of 706's filed these days and they should be prepared with the assumption that they will be audited (although that could be said for any return we prepare).

funny story, in probate an executor complained to the judge of a $7,000 bill for the 706--the judge reviewed the size of the estate and changed the bill to a percentage of value, which resulted in raising it to $50,000.

[michaelmars]

Late to the game - I would do the 706 if there are market value assets with step up to establish the basis for the beneficiaries.  Also, states may have lower thresholds than feds.