Estate and Gift Taxes in the USA: Understanding When and How to File Estate Tax Returns

Estate and gift taxes in the United States apply to wealth transfers at death and to significant lifetime gifts. To comply with the tax regulations and make informed decisions about their estate planning, individuals and their heirs must understand the rules governing when and how estate tax returns must be filed.

Estate Taxes: A Brief Overview

Estate taxes are levied on the transfer of an individual's assets upon their death. While not everyone is subject to estate taxes, the federal government imposes taxes on the estates of individuals whose taxable estates exceed a certain threshold, known as the estate tax exemption. For 2026, this exemption is $15 million per person — effectively $30 million for a married couple that elects portability — and it is indexed for inflation with no scheduled sunset. Estates that exceed this threshold must file a federal estate tax return. New York has its own estate tax with a far lower threshold: a New York return is required when the New York gross estate (plus taxable gifts made within three years of death) exceeds the basic exclusion amount — $7,350,000 for 2026 — and an estate more than 5% over that amount loses the exclusion entirely.

When to File an Estate Tax Return

The estate tax return is due within nine months of the decedent's date of death. However, there is a possibility to apply for a six-month extension if necessary. Failing to meet these deadlines may result in penalties and interest.

Gift Taxes: Another Aspect of Wealth Transfer

In addition to estate taxes, the United States also imposes gift taxes on significant lifetime transfers. The annual gift tax exclusion allows individuals to give a certain amount of money or property to another person without incurring gift tax. The annual gift tax exclusion is $19,000 per recipient per donor for 2026. A gift tax return (Form 709) is required whenever gifts to one recipient in a year exceed this annual exclusion, even though no tax is actually owed until lifetime gifts exceed the lifetime exemption, which is the same as the estate tax exemption. These returns are due by April 15th of the year following the gift.

The Role of an Estate Tax Return

The estate tax return, typically known as Form 706, provides detailed information about the assets of the deceased individual and calculates the estate tax liability. It includes a thorough inventory of the decedent's property, deductions, credits, and exemptions, all of which help determine the final tax owed by the estate. Properly prepared estate tax returns are crucial not only for ensuring compliance with the law but also for minimizing the tax liability of the estate and preserving the inheritance for the heirs.

Estate planning professionals, including estate planning attorneys like us, can provide invaluable guidance in navigating the complexities of estate and gift taxes and coordinate with your accountant so that the required returns are filed accurately and on time. By understanding the nuances of these tax obligations, individuals can make informed decisions to protect and efficiently transfer their assets to the next generation.

Estate and gift taxes