5 Estate Tax Return Mistakes to Avoid

Administering a high-value estate can be very difficult, even for executors who are intimately familiar with the decedent’s financial affairs and family considerations. However, informed executors can still make mistakes—some of which can have far-reaching consequences.

Common estate tax return mistakes include:

1. Failing to File By the Deadline

An estate tax return—IRS Form 706—must be filed within nine months of the decedent’s death. If IRS Form 706 is filed past the deadline, the estate may no longer be entitled to certain exclusions and exceptions. Additionally, late filing could trigger penalty fees and interest.

Although the IRS regularly approves extensions both for filing and paying estate taxes, it is the executor’s responsibility to request an extension before the deadline.

2. Not Taking Advantage of Spousal Portability

“Portability” is a term used to describe a provision that permits a surviving spouse to claim and use the deceased spouse’s unused estate tax exclusion upon their own death. However, unused exclusions can only be ported if the executor elects to claim the portability exclusion upon the first spouse’s death.

3. Missing Gift Tax Returns

The decedent should have filed IRS Form 709 following any transfer of gifted assets that surpassed their annual gift exclusion. The executor must ensure that all copies of Form 709 are available and accounted for—even if it means reaching out to the IRS and requesting records. This is because prior gift exclusions can have a significant impact on other estate and generation-skipping tax exemptions.

4. Overlooking the Decedent’s Tax Provisions

If the decedent’s will or trust included a tax allocation clause, federal estate tax liability may be the responsibility of individual heirs and beneficiaries—not the estate.

5. Leaving Out Appraisals and Assessments

One of the most significant and practical challenges for executors is the appraisal of estate assets. This is especially true in instances where the decedent owned certain types of complex assets—such as a business or a large collection of artwork or other collectibles.

Since the completion of IRS Form 706 requires that the executor provide documentation to substantiate appraisals, the failure to provide evidence of such assessments could trigger an audit—delaying estate administration and forcing heirs to wait even longer to receive their share of an inheritance.

Let the Law Firm of Kavesh, Minor & Otis, Inc. Help Keep Complications Out of Your Inheritance

Estates large enough to trigger the federal estate tax are often complex enough to make mistakes seem all but unavoidable. However, any mistake—no matter how minor—could give rise to unexpected challenges or lead to the federal government enacting large penalties.

The Law Firm of Kaves, Minor & Otis, Inc. has decades of experience helping California families protect their rights to an inheritance. Our Los Angeles and Orange County trust and estate administration lawyers could help you with the following:

Assist Your Executor With Time-Sensitive Tax Returns

The federal estate tax is only levied on a small percentage of all California estates, but it still provides a significant source of revenue for the federal government. Thus, as flexible as the IRS might be in offering extensions, any unannounced filing delays carry the risk of heavy fees and high-rate penalty interest.

Don’t take chances with an inheritance. Our attorneys have spent decades administering complex estates and could help ensure that your probate claim is managed without unnecessary delays or risks.

Make Sure Complex Assets Receive the Attention They Deserve

Executors and estate representatives have a legal obligation to manage estate assets responsibly—even when the “asset” is a business, a rental property, or another holding that demands constant supervision and a careful eye for detail.

The Law Firm of Kavesh, Minor & Otis, Inc. could protect volatile assets from depreciation and loss by enforcing the decedent’s wishes and by bringing in third-party experts to offer counsel.

Inventory and Appraise Estate Assets

Our attorneys could help provide a full accounting of the estate’s assets and contract expert appraisers to assess the gross value of art collections and other objects that might attract the IRS’s attention.

Resolve Disputes Among Heirs

Large inheritances can lead to big disputes. If they’re not managed carefully, they can cause unwanted probate claims and litigation.

Our attorneys regularly facilitate private mediation, but we’re not afraid of a challenge, either. We take our responsibility to our clients seriously and will vigorously defend estates from bad-faith creditor claims and other unreasonable attempts at exploitation.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.