Understanding Estate Taxes

Estate taxes apply to the transfer of a deceased person’s assets to heirs and beneficiaries. While most estates fall below the federal estate tax exemption, high-net-worth individuals may face significant tax liability. Accurate reporting and strategic planning are crucial. At Z Tax & Accounting, we provide expert guidance on estate taxes and the preparation of IRS Form 706 to ensure compliance and minimize tax impact.

1. What Is Estate Tax?

Estate tax is a federal tax on the total value of a deceased person’s assets, including:

• Real estate and personal property
  
  

• Investments (stocks, bonds, mutual funds)
  
  

• Business interests and partnerships
  
  

• Life insurance proceeds (if payable to the estate)
  
  

Key point: Estate tax is assessed on the net value of the estate after debts, expenses, and certain deductions are applied.

2. Federal Estate Tax Exemption

• As of 2025, the federal estate tax exemption is $13.61 million per individual (subject to annual adjustments).
  
  

• Estates valued below this threshold are generally not subject to federal estate tax, but reporting may still be beneficial.
  
  

• State-level estate taxes may apply even if the federal exemption is not exceeded.
  
  

3. IRS Form 706: Estate Tax Return

Form 706 is the estate tax return used to report the value of a deceased person’s estate and calculate any federal estate tax owed.

Key aspects of Form 706:

• Filing Requirement: Estates exceeding the federal exemption threshold must file within 9 months of the decedent’s date of death.
  
  

• Property Valuation: All assets must be valued as of the date of death or an alternate valuation date.
  
  

• Deductions: Funeral expenses, debts, mortgages, charitable contributions, and certain marital deductions can reduce taxable estate value.
  
  

• Credits: Applicable credits, such as prior gift tax paid, may offset estate tax liability.
  
  

Failure to file Form 706 accurately and on time may result in penalties and interest.

4. Estate Tax Planning Strategies

Z Tax & Accounting helps clients minimize estate taxes through strategic planning, including:

• Lifetime Gifts: Reduce estate value by transferring assets during life, subject to gift tax limits.
  
  

• Marital Deduction: Transfers to a surviving spouse can be tax-free.
  
  

• Charitable Contributions: Gifts to qualified charities reduce taxable estate.
  
  

• Trusts: Establishing irrevocable or charitable trusts to protect assets and reduce estate tax liability.
  
  

• Business Succession Planning: Structuring business interests for optimal tax efficiency.
  
  

5. Common Estate Tax Challenges

1. Valuing complex assets such as businesses, partnerships, or artwork
   
   

2. Coordinating federal and state estate tax obligations
   
   

3. Determining allowable deductions and credits
   
   

4. Filing timely and accurate Form 706 to avoid penalties
   
   

5. Planning for liquidity to pay estate taxes without forcing asset sales
   
   

How Z Tax & Accounting Assists with Estate Taxes

Our services include:

• Form 706 Preparation and Filing: Ensuring accurate reporting of all estate assets, deductions, and credits.
  
  

• Valuation Guidance: Assistance in appraising real estate, business interests, and personal property.
  
  

• Estate Tax Planning: Strategies to minimize estate taxes and maximize inheritance.
  
  

• Coordination with Attorneys and Trustees: Ensuring tax compliance aligns with estate planning goals.
  
  

• State Estate Tax Compliance: Navigating additional requirements at the state level.
  
  

With our expertise, executors and estate administrators can confidently manage estate tax obligations and protect family wealth.

Conclusion: Expert Estate Tax Guidance for Peace of Mind

Estate taxes can be complex, but careful planning and accurate reporting ensure compliance and minimize financial burden. Z Tax & Accounting specializes in estate tax services, including Form 706 preparation, asset valuation, and strategic planning, helping clients safeguard their legacies.

Contact Z Tax & Accounting today to schedule a consultation for personalized estate tax guidance.