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.
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 lists certain deductions allowed, and then results in the net taxable estate. If there is no taxable estate, it essentially describes the taxes owed and whether they are to the estate or the IRS.
Estate tax returns are generally due nine months after the date of death in Lombard. There is a process for obtaining a six-month extension, but the general deadline is nine months after the date of death.
The assets included in Lombard estate tax returns are basically every single thing that a person owned when they died. This also includes proceeds commonly considered non-probate assets, such as grant or trust assets, life insurance, retirement accounts, beneficiary accounts, payable-on-death accounts, and anything in the decedent’s name at the time of death. That also includes the value of land, the value of small businesses, the value of partnerships, stocks, bonds, cash, and all other assets of the decedent.
What some people do not realize is that it takes into account non-probate assets. Even though they might have a large life insurance policy payable directly to a beneficiary, the value of those policies still counts for estate tax purposes.
Usually, the value of the assets is as of the date of death. People can apply for an alternative tax evaluation, but most of the time, the evaluation is based on the date of death. For land, people in Lombard may need to attach appraisals to their estate tax return. In the case of businesses, they need to be evaluated, and the professional valuation is 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 to making that alternate valuation date, so it is important to consult with a lawyer and an accountant to determine the benefits and drawbacks of making that election.
The documents that need to be submitted with an estate tax return in Lombard include valuation documents for businesses and land, and a 1099 for income and other accounts. Another aspect of estate tax returns is certain deductions, including attorney’s fees. Attorney fee bills and similar documents should be submitted along with an estate tax return.
Personal representatives are responsible for the final year tax return of the decedent’s life. If a decedent passed away in 2019, the executor or administrator must file the decedent’s final personal income tax return for 2019. It basically covers any income they have earned between the first of the year and their date of death, and the personal representative is also required to file estate tax returns for the estate itself.
The estate is a separate entity from the person who passed away. If they are doing that personal income tax return, they would basically be filing it on behalf of the individual, using their Social Security Number, and signing it as a representative of the estate. After the date of death, the estate becomes a separate entity, essentially, so there is a separate tax identification or EIN that is obtained for the estate, which is in the name of the estate. After the date of death, if needed, 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 in Lombard. 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 it meets other requirements, like the $600 mark, then the estate return needs to be filed for those four years.
That is different from an estate tax return, Form 706, which is about all the assets a decedent had while alive. The estate’s tax return, Form 1041, is for the income that accrues to the estate while it is still open. This is an entirely separate EIN and tax identification number.
Navigating the legal waters of trusts and estates law is something not everyone is familiar with. To improve your odds of success, consider working with an attorney familiar with estate tax returns in Lombard. Reach out to a competent attorney today.
