If you have been named as the executor of the estate of a friend or family member in Miami, then one of the first things that you should consider are the tax considerations of the assets you are now in charge of. This requires becoming familiar with the IRS Form 706. What is this form? It is the one used to submit an estate tax return. Copies of this form can be downloaded directly from the Internal Revenue Service’s website. Make sure, however, that you are using the current year’s form, as these documents are often updated annually.
Form 706 will assist you in determining the value of your loved one’s estate. It helps in identifying the “stepped-up” valuation of the estate assets. For example, if your loved one purchased stock several years ago, and then left those shares to his or her beneficiaries upon his or her death, the Form 706 allows those heirs to minimize capital gains taxes by treating the shares as if they were purchased at their current market value.
Another aspect that the Form 706 addresses is the generation-skipping transfer tax. Many believe that they may be able to avoid paying estate taxes by leaving their wealth to their grandchildren. However, the generation-skipping tax imposes a further 40 percent tax on any amount above the estate tax exemption that is on top of any estate taxes owed.
You must file a Form 706 if the estate of your loved one exceeds the estate-tax threshold amount ($5.49 million for 2017) or if the decedent’s spouse wishes to elect portability on the unused portion of his or her estate tax exemption. The Form 706 must be filed within nine months of the decedent’s death, not in the following year’s traditional tax season.