The need to file an estate tax return even when it is not required

A person can die in 2011 with up to $5,000,000 and his or her estate will pay no federal estate taxes. The federal estate tax return, form 706, is not required to be filed if the gross estate of a person dying in 2011 is less than $5,000,000. But the only way to transfer the $5,000,000 estate tax exemption of the first-spouse-to-die to the surviving spouse is for an estate tax return to be filed for the first-spouse-to-die.

The first-spouse-to-die’s estate tax return must be timely filed in order to transfer the exemption. If the return cannot be filed within 9 months of the first-spouse-to-die’s death, it must be put on extension. Otherwise, it will be a late filed return, and the exemption will not transfer.

Instructions for the estate tax return for people dying in 2011 tell us that by filing the return, the election is automatically made, so no box needs to be checked on the return.

It is critical to remind clients that the surviving spouse’s exemption could go down to $1,000,000 if the surviving spouse dies in 2013 or thereafter. That is why it is important to lock in the first-spouse-to-die’s exemption by having the surviving spouse timely file the estate tax return of the first-spouse-to-die.

About randyspiro

I am a super lawyer in California with dual specialization in Estate Planning and Taxation.
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