Overview of gross estate and federal estate tax exemption

The Tax Cuts and Jobs Act significantly raised the federal estate tax exemption. For the executor of an estate in California to know if an estate has exceeded this exemption, the person must calculate the gross estate of the decedent. Estates with values above the exemption will need to complete form 706 for the Internal Revenue Service. If any estate taxes are owed, they must be paid no later than nine months after the person's date of death.

Changes to tax law in 2018 raised the federal estate tax exemption to $11,180,000 per person from $5,490,000 per person. In 2019, the exemption went up again to $11,400,000 per person or $22,800,000 for a married couple.

The valuation of gross estate will take into account real estate, bank accounts and stocks. Joint assets with right of survivorship, community property and annuities count toward the gross estate as well even if some of the assets will be paid to beneficiaries. Assets gifted to others during the decedent's life also enter the equation.

Something known as the gift tax specific exemption could influence the tallying of the gross estate. This exemption applies to gifts that occurred between Sept. 9, 1976, and Dec. 31, 1976. For gifts made after this period, adjustments could be made for taxable gifts.

With taxes possibly due within nine months of death, an executor of an estate might choose to consult an attorney when preparing tax filings. An attorney may research and answer specific questions about an estate's finances, debts and distributions to heirs. A legal representative may also prepare documents necessary for estate administration and probate. With personalized advice, an executor might gain a clear understanding of tax issues and avoid delays or disputes with tax agencies or the probate court.

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