The overwhelming majority of estates are not large enough to require payment of the federal estate tax and are therefore not required to file the estate tax forms. For most of them, it is wise not to waste money on any professional preparation fees for filing the forms. However, there is an important exception.
When a spouse passes away, the entire estate can be passed to the surviving spouse tax-free. If the deceased spouse’s estate is worth more than $5.43 million, then an estate tax form must be filed, even though no tax will have to be paid. However, if the estate is worth less than that amount, then no estate tax form is required to be filed. Most people will therefore decline to file the form, because they do not wish to pay any fees associated with doing so. As the Albuquerque Journal points out in “Relaxed estate tax law requires warning,” some surviving spouses should file the estate tax form even when the estate is less than $5.43 million.
The issue is that a surviving spouse can elect to take the deceased spouse’s estate tax exemption as well as their own. Thus, the surviving spouse’s estate will be able to protect twice the amount of assets. This is only possible if the estate tax form is filed and the election made on the form. What this means is that if there is a reasonable chance that the surviving spouse’s eventual estate will be worth more than $5.43 million, the estate tax forms should be filed for the deceased spouse’s estate. If they are not, then the surviving spouse’s estate may have to pay unnecessary taxes.
Reference: Albuquerque Journal (July 13, 2015) “Relaxed estate tax law requires warning.”
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