Significant changes to the estate and gift tax are a regular topic of discussion in Congress and in the popular press. The Tax Cuts and Job Act (TCJA, PL 115-97) amended federal estate and gift tax provisions to temporarily increase the lifetime exemption and the annual gift exemption. As the clock ticks toward 2025 and the expiration of the law, accountants may wish they had a “crystal ball” to predict the future of the estate tax.
This month’s column cannot make predictions, but examines free federal and state estate tax resources from the IRS, Findlaw and two professional firms to help readers plan their estate taxes.
IRS inheritance and gift taxes
The IRS Estate and Gift Tax landing page (https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes) provides access to an organized collection of IRS resources on estate and gift tax topics, as well as a variety of related materials for nonresidents experiencing U.S. estate and gift tax issues.
The main estate tax page (https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax) provides a brief definition of estate tax, a description of gross estate, allowable deductions, and taxable estate. Form 706 must be filed if the decedent’s taxable estate, increased by adjusted taxable gifts, exceeds the filing threshold ($13,610,000 in 2024). The web format instructions for Form 706 are conveniently linked at the bottom of the main estate tax page, although the instructions for all IRS forms are most easily found at https://www.irs.gov/instructions.
IRS inheritance and gift tax
https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes
“What’s New – Estate and Gift Tax” (https://tinyurl.com/sf3w44c3) covers the new process for obtaining an estate tax final letter and the new mailing address for estate and gift tax returns. The IRS clarifies that individuals who claim the enhanced exemption for 2018-2025 will not suffer any disadvantage when calculating the estate tax exemption under the provisions of the TCJA. This webpage also contains the current basic exemption table and an annual gift tax exemption table.
The inheritance tax FAQs (https://tinyurl.com/23dhft7r) cover more than two dozen topics, from filing requirements to the need to amend a previously filed return to paying electronically. There are also several questions that specifically address inheritance tax return preparation, IRS audits, and international situations. The answers generally include links to other IRS web pages, tax forms and instructions, and IRS publications.
CPAs may find “Information for Executors” (https://tinyurl.com/2k69s7nw) helpful if they are a first-time executor. In addition, the Deceased Person page (https://tinyurl.com/ypfaurrh) is a good reference for executors and family members trying to complete tax filing obligations after a taxpayer’s death. Topics include filing the final tax return, the duties of an estate executor, and identity theft for deceased individuals.
“Estate Tax for Nonresidents Who Are Not U.S. Citizens” (https://tinyurl.com/35f98hra) addresses estate taxation of property located in the United States, which can include both tangible and intangible assets. Estates generally must also report the total value of assets located outside the United States at the time of death. The estate may need to file Form 706-NA or request a certificate of transfer from the IRS showing that all taxes have been paid in full.
Findlaw
Findlaw provides free access to articles and news, as well as federal and state law, legal cases, and tools. In the Estate Planning section (https://www.findlaw.com/estate.html), Findlaw materials are organized under the topics of estate planning, estate administration, wills, living wills and health directives, powers of attorney, trusts, estate administration, and inheritance tax law. Estate tax topics include federal and state inheritance and gift taxes. Most resources are provided at a general level. However, given the complexity of inheritance tax and the ability to directly access tax law based on primary sources, Findlaw can be a convenient site for CPAs who do not frequently deal with inheritance tax issues.
The main “Estate Tax Law” page (https://www.findlaw.com/estate/planning-an-estate/estate-tax-laws.html) provides an overview of the estate tax and links to articles that cover some topics on the basics of estate tax law and how to reduce the estate tax. A very handy list of the 12 states with state-level estate taxes and six with state-level inheritance taxes is presented. The related article, “State Death Taxes: Estate Inheritance, and Gift Taxes” (https://tinyurl.com/mr22arye), compiles a detailed table of all 50 states, along with links to the Findlaw resource for a specific state’s estate and inheritance tax laws – including states that do not currently impose taxes.
“Federal ‘Death Taxes’ FAQ” (https://tinyurl.com/2tdp9fwx) provides links to the IRS’s main web pages on inheritance and gift taxes, as well as links to Findlaw’s resources on the Internal Revenue Code—particularly Title 26, Subtitle B, Inheritance and Gift Taxes (https://tinyurl.com/ysvcs75k). The discussion also includes four trusts, such as the Qualified Terminable Interest Property (QTIP) trust. “10 Ways to Reduce Estate Taxes” (https://tinyurl.com/5nvj96sd) provides more information on trusts, as well as the obvious options of transferring assets during marriage, gifts during one’s lifetime to children and grandchildren, and gifts to minors. Family trusts and private pensions are also covered. “Estate Taxes and Life Insurance Taxes” (https://tinyurl.com/4fw8642d) is an excellent article that summarizes the three main tax limitations on transferring insurance policies for estate tax purposes and the two permissible methods: transferring policy ownership and transferring the policy to a life insurance trust.
Center for Financial Planning
The Center for Financial Planning (CFP) (https://www.centerfinplan.com/) is a financial planning and investment management firm that also offers a speakers bureau for professional and employer groups and free resources on its website. The Resources page (https://www.centerfinplan.com/resources) presents collections of information on typical financial planning topics such as Social Security, tax planning, and estate planning. The Estate Planning page (https://www.centerfinplan.com/resources-estate-planning) offers three useful downloadable PDF documents: Final Instructions Letter, Personal Financial Records System, and Your Record Keeping List. A related 18-minute webinar covers the current estate tax situation, wills and trusts, and powers of attorney.
Center for Estate Planning Law
The Estate Planning Law Center (EPLC) (https://eplawcenter.com/) is a law firm specializing in estate and tax planning, asset protection, and Medicaid qualification. In addition to professional services, EPLC also offers free workshops and a weekly blog that publishes articles tailored to its service lines (https://eplawcenter.com/estate-planning-news/). One well-received blog post is “The Risks of Giving Adult Children an ‘Advance’ on Their Inheritance,” which identifies three issues to consider. First, if a parent gives money or assets to a child who may have a special need, the other children may be jealous. Relatedly, will that child accept a reduction in their eventual inheritance for the “advance”? Second, are the children mature enough to handle a significant sum of money on their own? Third, even though the parent may be healthy now and does not expect to need this advance, many of them will need expensive long-term care at some point in their lives.
Findlaw
https://www.findlaw.com/estate.html
