If you utilize a last will as your asset transfer vehicle, the person who would handle the estate administration tasks after you are gone is called the executor or personal representative. When you create the will, you can nominate the person that you would like to empower to act as the executor.
We should point out the fact that the estate administrator is the trustee if a trust is used as an asset transfer vehicle instead of a will.
The estate administrator, whether it is an executor or trustee, handles the business of the estate after the decedent’s passing. Taxation can enter the picture, but fortunately, most families are not going to be faced with estate tax exposure.
Why is this the case? Though there is a federal estate tax that is applicable in all 50 states, there is a relatively high credit or exclusion. Only the portion of an estate that exceeds the amount of this exclusion would potentially be subject to the death tax.
When assets are being transferred between spouses who are American citizens, there is no estate tax, because there is a marital deduction. You would not have to use any of your exclusion to transfer assets tax-free to your spouse, but you would be using it to transfer assets to others in a tax-free manner. In 2016, the federal estate tax exclusion stands at $5.45 million.
Internal Revenue Service Form 706
An estate tax return is only required when an estate is actually subject to the estate tax, but there is a reason why you may want to file an estate tax return even if the estate tax is not due and payable right away. The form that is filed when an estate is subject to the estate tax is Internal Revenue Service Form 706. Under federal law, the form must be submitted within nine months of the passing of the person in question. It is however possible to request a six-month extension.
The other reason why you may want to file IRS form 706 is to opt for portability. In an estate planning context, the term “portability” is used to describe the right of a surviving spouse to use the exclusion that was allotted to his or her departed spouse. You can use two exclusions if you are a surviving spouse, but you have to opt for portability by filing this form within nine months the passing of the decedent.
Detailed Estate Tax Information
If you would like to obtain more detailed information about the federal estate tax and the strategies that can be implemented to reduce your exposure, we have a valuable resource that you can access through this website.
Our firm has prepared an in-depth special report on the subject, and you can click this link to access your copy: Free Estate Tax Report.