Unpaid estate taxes can hold both the executors and the estate’s personal representatives accountable if they are applying for or distributing their assets. So, let’s learn more about how things work under IRS (Internal Revenue Service).
Role of Estate Tax Closing Letters
If you didn’t already know about the estate tax closing letters, they are sent by IRS once Form 706 has been reviewed and accepted. This form is filed after the person’s death by the executor of the estate. Form 706 determines how much estate taxes are due according to IRS Code Chapter 11. This form also helps to determine generation-skipping taxes.
Closing letters enable the estate to settle and probates to close. Estates cannot be settled until the matters of estate taxes are resolved.
Another crucial thing to remember is that the requirement to file Form 706 and receive the closing letters is determined from the gross estate value. As of 2021, the amount is $11.7 million.
Motivations Behind the Decision
Only a few years back, IRS halted automatically issuing these decisions. This was a cost-saving move. IRS believed that fiduciaries could get their hands on the same level of information as a closing letter by assessing if the transaction code and the explanation of “421 were mentioned on the estate’s tax transcript.
Even though the automatic issuing of the closing letter has been stopped, the estates can still request to get one if they want. Fiduciaries and local probate courts rely on the information contained within the state closing letters.
Remember that you will have to pay a $67 user fee to request a closing letter.
Contact an Experienced Estate Planning Attorney
If you want further information or any help regarding estate tax closing letters, contact us right away. At Keystone Asset Protection and Estate Planning, we would be more than delighted to provide our services so that you can protect your assets and preserve your hard work.