Estate & Gift Tax Planning

We provide assistance with Estate & Gift Tax Planning. For deceased individuals our firm prepares Federal and/or State Estate tax returns as may be necessary. In addition, we provide assistance with lifetime gift giving issues (“gift tax planning”).

TO DO STEPS – Preparation of Federal and / or State Estate Tax Returns

1. Please either email (ron@rlcohen.com) or call (425) 454-0915 for an appointment.
2. Download the Inventory Worksheet.
3. Download the Summary of Necessary Documents.
4. Do the BEST you can to obtain the information for the Inventory and Summary of Necessary Documents. For the initial appointment, please bring in the Original Will/Codicil/Trust Agreement & if available, a certified copy of the death certificate. For the financial information just bring in copies of recent bank & brokerage statements (preferably for the month ending prior to the date of death), and if applicable, any employment related financial information (i.e. group-term life insurance & retirement accounts). At our initial appointment, we will review the financial information and determine if there is any additional financial information or documentation which may need to be obtained.

Estate Tax

The Federal Estate Tax (FET) is enacted by Congress and provides for uniform tax law throughout the United States. The FET applies to “any interest” in property the decedent owned at the time of death which is referred to as the “Gross Estate”. The Gross Estate includes both Probate & Non-Probate assets owned by the decedent at the time of death. The FET is generally based upon the date of death fair market value (although alternate valuation is available under certain circumstances). It is the responsibility of the decedent’s Personal Representative or Trustee to identify all of decedent’s assets & obtain date of death values. In addition, it is necessary to identify any outstanding debts and liabilities owed by the decedent at the time of death.

Generally, a FET return (IRS Form 706) is required to be filed if the decedent’s Gross Estate exceeds the relevant FET exemption amount. In January 2013, Congress established the FET exemption amount for a U. S. citizen or U.S. resident at $5,250,000. If the Gross Estate is less than the FET exemption amount then No FET return is required to be filed. However, the FET exemption amount may have been reduced by taxable gifts made during the decedent’s life. Accordingly, it is necessary to determine if the decedent made any taxable gifts in prior calendar tax years. If the decedent’s Gross Estate exceeds the FET exemption amount, then a FET return is required to be filed within nine (9) months from date of death (or later with a valid extension).

If the decedent is married and is survived by a spouse who is a U. S. citizen, then the FET unlimited Marital deduction may be available to offset any potential FET. Generally, upon the death of the first spouse, the combination of the FET exemption and the FET marital deduction will eliminate any exposure to FET liabililty at that time. The FET liability will arise, if at all, upon the death of the surviving spouse. In January 2013, Congress made the concept of “Portability” permanent. Generally, this means if the first deceased spouse has any unused FET exemption amount, then the unused portion is “Portable” to the surviving spouse. The Portability feature is not automatic and a timely FET return needs to be filed to claim the Deceased Spouses Unused Exemption (“DSUE”) amount. The FET rate is 40%.

In May 2005, the State of Washington enacted an independent estate tax from the FET. The Washington State Estate Tax exemption is $2 million per person. The tax rates are less than the FET running from 10% to 19% on larger estates. The federal tax concept of Portability does not apply to the Washington State Estate Tax. Because the Washington State Exemption is substantially less than the FET exemption, an estate tax return may need to be filed for Washington State but not for FET purposes.

Gift Tax

Gift Tax planning is focused on making gifts of property/monies while the donor is living. The Federal Gift Tax (“FGT”) provides for uniform tax law throughout the United States with respect to gifts made in the United States by donor U.S. citizens or U.S. residents. Other complicated rules apply to gifts made by non-resident aliens to U.S. citizens and/or residents.

Generally, gifts made by a donor to a donee in a calendar year which do not exceed $14,000 in total monetary value will qualify as “annual exclusion gifts”. The donor does not need to file a FGT return and no FGT exemption (same as FET exemption) is used. If total gifts during the calendar tax year to a donee exceed $14,000 then likely a FGT Return (IRS Form 709) needs to be completed. Generally, the donee of a gift receives the gift income-tax free.