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Filing an estate tax return even when no tax is due

Print | Comments () Posted by Cheryl Costa June 7, 2012 10:56 AM

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Currently, the federal estate tax kicks in for estates greater than $5,120,000. That is a big jump from 2001 when the limit was just $675,000. That's great news because it means that fewer people are subject to estate taxes. However, the even better news is that the $5M+ exemption is now a per-person amount and if one spouse does not use their full $5,120,000 the unused amount can be "rolled over" and used later by the surviving spouse.

Previously, a couple could effectively shelter two times the exemption amount but they had to establish trusts and re-title assets to protect each person's exemption amount. Now, you do not need to establish trusts to make this happen.

You do, however, need to file a timely estate tax return in order to preserve the unused exemption of the first-to-die spouse. This return would be filed even when no taxes were owed. Failure to file the return would result in the loss of the unused exemption amount so be sure to check with your estate planning attorney.

The "rollover" of the exemption amount to a surviving spouse was effective for decedents who died in 2011 and 2012 and is scheduled to expire at the end of this year.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a principal at Forteris Wealth Management which is an independent, fee-only firm with offices in Framingham and Purchase, NY. She advises clients on investing, education funding, taxes and retirement planning. She has a BS from Worcester Polytechnic Institute and an MBA from Boston University and she is a Certified Financial Planner.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.