Estate Tax Return Preparation San Diego

When a person passes away, you may need to file an estate tax​return on their behalf. In other words, Uncle Sam can catch you off-guard even after the death.

Luckily, the estate tax is only levied on high-net-worth individuals who owned an estate worth more than $12.06 million ​for 2022. This may change in the near future as the current President wants this to be at a much lower threshold. In this scenario, when the person passes away, the heir may be subject to estate tax, which the latter need​s to file within 9 months of the date of the descendent’s death.

In certain cases, the estate tax may constitute half the amount of the entire estate owned by the deceased. This is why it’s so important to consult a knowledgeable tax professional who can help reduce the amount the heir may owe to Uncle Sam.

Not everyone needs to pay the estate tax. For instance, the property left to a spouse is not subject to estate tax. The law is known as a marital deduction, which allows the surviving spouse to shelter the estate without paying anything. It’s also important to understand that noncitizen spouses are not entitled to such exemptions.

In contrast, when the spouse, who received the estate, passes away, the children may be subject to the estate tax because the martial exemption doesn’t apply to them. If you received an estate or you think that you may be subject to estate tax, it’s time to consult a tax advisor and file Form 706.

Common Scenarios

Any estate tax return preparation should start by consulting a tax professional because they can help save a substantial amount on the tax return. Here are just a few examples of potential savings:

  • According to the latest provisions, the estate tax is applicable on an estate worth more than $12.06 million. It means that if the estate is $14 million, the estate tax is only levied on the portion greater than $12.06 million. In this case, the heir is liable to pay tax on $1.94 million only, which is the total amount that exceeds $12.06 million.
  • Form 706 can be used to file generation-skipping tax. The GST, generation-skipping tax benefits grandchildren whenever their grandparents transfer property or money to grandchildren without first transferring it to the children. A knowledgeable tax professional can help skip GST when filing Form 706.
  • If you live in San Deigo and nearby areas, it’s good to know that California is among the 38 US States that don’t apply a state tax on the estate. However, the estate does not constitute real estate only, which means that you may need to pay tax on other assets such as investments.

Estate Tax Portability

As evident from the previous section, estate tax return preparation is critical to accurately​filing Form 706. In fact, your tax adviser can also help you save thousands of dollars by using DSUE, deceased spousal unused exemption. Under the estate tax portability provision, spouses and their heirs are eligible for tax exemption.

For the sake of this discussion, let’s assume that Smith has $4 million in IRA and he and his wife, Susan, have another $5 million in a joint account. If Smith passes away, his wife will be the beneficiary of the entire amount equalling $9 million. There will be no tax because the amount is less than $12.06 million and the martial exemption law also protects the transfer.

Let’s say that Congress passes a bill in 2023 to lower the exemption to $5 million. If Susan passes away, her children or the executor of the estate will need to pay tax on any remaining amount over $5 million. However, if Susan had made the election to transfer the DSUE, the children will not pay any tax because they are sheltered by the estate tax portability provision.

Of course, this is just one example where your tax advisors can come in handy. There are lots of other ways where tax consultants can save you thousands of dollars in taxes.

FORM 706

The FORM 706 is available from the IRS website. Here is an overview of its contents divided into six sections:

  1. Part 1—Decedent and Executor: In this section, the decedent and the executor provide key information such as their name, SSN, and address.
  2. Part 2—Tax Computation: Part 2 allows the executor to calculate the estate tax.
  3. Part 3—Elections by the Executor: The executor can use this section to indicate special provisions such as paying the estate tax in installments.
  4. Part 4—General Information: It is used to provide evidence such as a death certificate.
  5. Part 5—Recapitulation: This section is used to calculate gross estate including assets such as stocks and bonds.
  6. Part 6-DSUE: The last part is used to specify the DSUE amount and related queries.


Filling a Form 706 may seem daunting but a reputable tax consultant can make things much easier. Now that you have some idea of estate tax returns, the only thing left to do is to find a competent tax advisor.

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