Asking for an Extension to File an Estate Tax Return
When and How to File a Form 706 Extension
Estates must file IRS Form 4768 to ask for an extension of time to file Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. The return is normally due within nine months from the date of death, but some estates need a little more time just to determine whether Form 706 is even required much less to value the decedent's property and file the return.
The Federal Estate Tax
Estates valued at more than $5.49 million are liable for estate tax on the balance over this threshold for deaths occurring in 2017. This exemption is indexed for inflation, so it increases periodically and it jumps to $11.2 million in 2018 thanks to the Tax Cuts and Jobs Act.
The Form 4768 Extension
Filing Form 4768 automatically gives the executor of an estate or the trustee of a living trust an additional six months to file an estate tax return—Forms 706, 706-A, 706-D, 706-NA, or 706-QDT. These are all estate tax returns applicable to certain situations. Form 4768 must be filed on or before the due date for Form 706 or the equivalent form for a given estate.
Form 4768 offers some additional relief as well. Part II of the form allows executors or trustees to ask for more than an additional six months to file the estate tax return if they attach a statement explaining why additional time is necessary.
The executor or trustee can also ask for additional time to pay any estate tax that is due by completing Part III of the form. This also requires attaching a written statement of explanation. If you simply don't know the value of the estate yet so calculating an estimated tax is impossible, you can check a box indicating this. Otherwise, the executor or trustee should include the anticipated tax payment when filing Form 4768.
Estates That Don't Owe Estate Taxes
The IRS recognizes a "portability election" that allows a surviving spouse to claim any leftover portion of the decedent's federal estate tax exemption to apply to her own estate when she dies. For example, if the decedent died owning a taxable estate worth $1 million, his surviving spouse can claim the $4.49 million balance of the exemption to shield her estate from taxation if he died in 2017.
The surviving spouse must file Form 706 to claim this election even if no estate tax is due because the $1 million in assets falls far below the $5.49 million exemption. Filing Form 4768 immediately at the time of death gives her 15 months to decide whether she wants to claim a portability election.
Some restrictions apply to the portability election, and its terms can change yearly. The Form 706 extension can give a surviving spouse more time to explore her options.
NOTE: Tax laws can change frequently and the above information may not reflect the most recent changes. Please consult with an attorney for the most up-to-date advice if you're dealing with an estate that might owe estate taxes, or if you're considering making a portability election. The information contained in this article is not legal or tax advice, and it is not a substitute for legal or tax advice.