Fedele and Murray, P.C.

17 Walpole Street, Norwood, MA 02062-3318 - (781) 551-5900

Estate Tax Returns

Federal and/or state estate tax returns are required whenever the total value of the decedent’s assets exceed the applicable filing thresholds. Effective for 2002 and 2003, if the total value of a decedent’s assets exceed $1,000,000, a Federal estate tax return will be required; for 2004 and 2005, the total value of the decedent's estate must exceed $1,500,000; for 2006 through 2008 the threshold is $2,000,000, and for 2009 the threshold is $3,500,000.

As of January 1, 2010 the Federal estate tax law was repealed. In 2011 the Federal estate tax was reinstated with the threshold being increased to $5,000,000. The $5,000,000 threshold was adjusted for inflation to $5,120,000 for 2012. As a result of the passage of The American Taxpayer Relief Act of 2012, the exemption will remain at the $5,000,000 amount, adjusted annually for inflation. The 2013 inflation adjusted exemption was $5,250,000, increased to $5,340,000 for 2014, then to $5,430,000 for 2015, then to $5,450,000 for 2016, then to $5,490,000 for 2017, and is currently $11,200,000 for 2018 as a result of the passage of the Tax Cuts and Jobs Act.

State estate tax returns may also be required. Generally, a state estate tax return is required to be filed with the state where the decedent was domiciled at the time of his death. State estate tax returns may also need to be filed with each state where the decedent owned any property, if that property was physically located within that state, e.g., a vacation home in another state.

With respect to Massachusetts decedents, an estate tax return will be required if the decedent died during 2002 with an estate valued in excess of $1,000,000. For decedents dying after 2002, the Massachusetts estate tax thresholds vary from year to year as follows:

The due date for filing the estate tax returns is nine months from the decedent’s death. (Note that it is also possible to get a six month extension of time to file these returns, although, if there is a tax due, an estimated tax will generally have to be paid within the original nine month deadline.)

In determining whether the decedent’s estate exceeds the filing threshold level, it is necessary to determine the value of his gross estate. Thus, even if there are deductions available to lower the taxable estate such that there is no actual tax due, if the value of the gross estate exceeds the filing threshold, then a return must be filed.

The value of the decedent’s gross estate includes all assets in which the decedent had an interest. The value is generally the fair market value as of the date of death. The term fair market value is generally the price at which property would change hands between a willing buyer and a willing seller when neither party is under any compulsion to buy or sell and both parties have reasonable knowledge of all reasonable facts. While the date of death is generally the valuation date, there is also available an alternate valuation which uses the fair market value of the decedent's assets six months after death (or the actual date of sale if a sale occurs between the date of death and the six month alternate valuation date). The alternate valuation date can be used only if it reduces the estate tax liability. The same method of valuation must be applied towards all assets, i.e., it is not possible to use the date of death values for some assets and the alternate value for other assets. The types of assets to be included in the gross estate include the following:

If the gross value of all of the above assets exceeds the applicable filing threshold, then the various debts and expenses relating to the decedent’s estate must next be accounted for. These would include the following:

Finally, after compiling the list of assets and debts and expenses, there may be other deductions and/or credits to be taken as well. These deductions include the following:

Once all of the above information has been gathered, the necessary computations are made to determine the amount of tax liability, if any. Fedele and Murray, P.C. can assist in gathering all the necessary information and will prepare all necessary returns and schedules for you.

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