Do You Have to File an Estate Tax Return?

An estate tax return addresses the federal levy on the transfer of a deceased person’s property to their heirs or beneficiaries. This tax applies to the entire taxable estate, not just the portion received by a specific beneficiary. It is distinct from an inheritance tax, which beneficiaries pay on what they receive, and also separate from the deceased’s final income tax return. The objective of an estate tax return is to determine if the value of the assets transferred at death exceeds a certain threshold set by the government, thereby incurring a tax liability.

Determining Federal Estate Tax Filing Obligations

The requirement to file a federal estate tax return depends on the gross value of the decedent’s estate. The Internal Revenue Service (IRS) mandates a filing if the gross estate, combined with any adjusted taxable gifts made during the decedent’s lifetime, exceeds a specific exemption amount. This amount is adjusted annually for inflation. For individuals dying in 2025, the federal estate tax exemption is $13.99 million.

The “gross estate” encompasses all property in which the decedent had an interest at the time of death, valued at its fair market value. This calculation includes a wide range of assets, such as real estate, cash, stocks, bonds, and other financial accounts.

Business interests, retirement accounts, and certain life insurance proceeds (if the decedent owned the policy or if proceeds are payable to the estate) are included. The gross estate also includes personal property like jewelry, artwork, and collectibles. Certain property transfers made during the decedent’s life, such as gifts with retained interests or transfers made within three years of death, can also be included. This gross estate calculation is made before any deductions, such as debts or administrative expenses, are applied.

Role of the Executor and Required Information

The executor, also known as the personal representative, is the individual or entity legally responsible for managing the deceased’s estate. This role includes identifying and valuing all assets, determining any outstanding liabilities, and ensuring compliance with federal tax laws, including filing the estate tax return if necessary. The executor’s duties involve a comprehensive collection of financial and legal documentation.

To prepare the federal estate tax return (Form 706), the executor must gather detailed valuation documents for all assets. This includes appraisals for real estate, business interests, and unique collectibles, along with statements for financial accounts like bank accounts, brokerage accounts, and retirement funds. Documentation of all the decedent’s liabilities and debts, such as mortgages, credit card balances, and medical bills, is also necessary.

The executor needs information related to potential deductions that can reduce the taxable estate. These deductions may include funeral expenses, administrative expenses incurred during estate settlement, charitable bequests, and the marital deduction for property transferred to a surviving spouse. Records of any prior taxable gifts made by the decedent also impact the overall estate tax calculation.

Filing Deadlines and Submission Process

The federal estate tax return, Form 706, generally must be filed within nine months after the date of the decedent’s death. For instance, if a person died on February 4th, the return would be due by November 4th of the same year. This deadline applies regardless of whether any tax is actually due.

If the executor anticipates needing more time to prepare the return, an automatic six-month extension can be requested by filing Form 4768. This form must be submitted to the IRS before the original nine-month due date. While this extension grants additional time to file the return, it does not extend the time to pay any estate tax owed; estimated taxes must still be paid by the original due date to avoid penalties and interest.

Once the Form 706 is completed, it can be submitted to the IRS by mail to the appropriate service center. After submission, the IRS processes the return, and the executor may receive confirmation of its receipt.