Filing for estate tax returns in Lombard could present challenges you might not be readily prepared to tackle. Instead of frustratingly trying to solve unnecessary problems, you need to let an attorney help. Competent attorneys could file the paperwork you need and guide you through estate management processes.

Estate Tax Returns in Lombard Explained

An estate tax return is the IRS Form 706, and then there is a corresponding form for the estate. Essentially, it is a tax return that describes the gross estate, then there would be certain deductions that are allowed, and then it would wind up with the net taxable estate. If there is not a taxable estate, then it describes essentially what taxes are owed, and whether it is to the estate or the IRS.

Estate tax returns are generally due nine months after the date of death. There is a process whereby a six-month extension can be obtained, but the general deadline is nine months after the date of death.

Assets Included in an Estate Tax Return

The assets included in Lombard estate tax returns are basically every single thing that a person owned when they died. This also includes proceeds that are commonly thought of as non-probate assets, so grant, or trust assets, life insurance, retirement accounts, beneficiary accounts, payable on death accounts, and everything that was in the decedent’s name when they died. That also includes the value of land, the value of small businesses, the value of partnerships, stocks, bonds, cash, and all over assets of the decedent.

What some people do not realize is again, it takes into account non-probate assets. Even though they might have a large life insurance policy that is payable directly to a beneficiary, the value of those policies are still going to count for the estate tax return purposes.

How Assets are Valued

Usually, the value of the assets is as of the date of death. People could apply for an alternative tax evaluation, but most of the time, the evaluation date is as of the date of death. In the case of land, people may need to attach appraisals to their estate tax return. In the case of businesses, those businesses need to be evaluated, and then the professional valuation also attached to the estate tax return. The executor of the estate also has the ability to make an election to use an alternate valuation date, which is basically the value of the assets six months after the decedent’s death. There could be different advantages or disadvantages with respect to making that alternate valuation date, so it is important to consult with a lawyer and an accountant as to what the benefits or the cons might be into making that election.

Additional Documents Needed

The documents that need to be submitted with an estate tax return in Lombard include valuation documents as to businesses and land and a 1099 with respect to the value of income and other accounts. Another aspect of estate tax returns is certain deductions, and those deductions include things like attorney’s fees. Attorney fee bills and similar documents should be submitted along with an estate tax return.

Tax Returns Personal Representatives May Need to File

Personal representatives are responsible for the final year tax return of the decedent’s life. If a decedent passed away in 2019, then the executor or administrator would need to file their final personal income tax return for 2019. It basically covers any income that they have made between the first of the year and their date of death, and then the personal representative is also required to file estate tax returns for the estate itself.

The estate is a separate entity than the person who passed away. If they are doing that personal income tax return, they would basically be filing the return on behalf of the individual, they would be using their Social Security Number, and they would be signing it as representative of the estate. After the date of death, the estate becomes essentially a separate entity, so there is a separate tax identification or EIN that is obtained for the estate that is in the name of the estate. After the date of death going forward, if there is a need, then the estate tax return is filed by the personal representative.

Generally, if there is income to an estate of $600 or less, then there is no requirement to file a tax return on behalf of the estate. If income is greater than $600, then there needs to be a return filed on behalf of the estate, and that is Form 1041, and the representative needs to do that basically every year that the estate is open. If it takes four years for the estate to close, and if it meets the other requirements, like the $600 mark, then the estate return needs to be filed those for four different years.

That is different than an estate tax return, Form 706, which is about all the assets that a decedent had while they were alive. The tax return for the estate, Form 1041, is for the income that accrues to the estate while it is still open. This is entirely separate EIN and tax identification number.

Let an Attorney Help With Estate Tax Returns

Navigating the legal waters of trusts and estates law is something not everyone is familiar with. To better your odds for success, you need to consider working with an attorney familiar with estate tax returns in Lombard. Reach out to a competent attorney today.