An estate tax, commonly referred to as the death tax or inheritance tax, is a tax paid out of the deceased person’s estate after they die. All documents, sales and the final payment are completed by the deceased person’s surviving family.
How is the Estate Tax Calculated?
Estate tax takes into account the deceased person’s gross estate. Items included in the gross estate for estate tax purposes are any land, businesses, bank accounts, investments, any trust property that the deceased person had a life estate in, and any life insurance policies where the deceased person was the owner.
What information must I send to the IRS?
The Internal Revenue Service has specific tax documents that the surviving family must fill out and send along with any estate tax payment. The executor of the estate must fill out Form 706 and submit it to the IRS within 9 months of the date of the descendant's death. A copy of the descendant's certificate of death and payment of any estate taxes owed must also be submitted with Form 706.
If the amount of estate tax owed is greater than the money in the estate a 3 month extension can be given for payment of the estate tax. Taking the final estate tax payment due date to 12 months after the time of the decedent’s death. This 3 month window is designed to allow the executor the chance to liquefy any assets and gather the full amount of estate tax due.
Who does not have to pay Estate Taxes?
Estate tax is never due on estates below the current exemption amount. If an estate falls under this amount, the Form 706 must still be filed, but the exemption cited and nothing will be due. To see if an estate falls under the current exemption amount, visit the Internal Revenue Service website and see the current Estate Tax Exemption Table.