Understanding ‘gross estate’ as it applies to taxes after death

When tax time rolls around in New York, diligent tax filers sometimes run across terms that leave them scratching their heads. One example is “gross estate,” which simply refers to all of the property owned by a person at the time of their death. This includes bank accounts, stocks and even exchanges or transfers made without adequate and full consideration, which is another way of saying gifts.

The term gross estate also applies to “real property” within the United States and the same type of property outside of the country. Certain types of community property, annuities and joint assets that include the right of survivorship are also included. Under certain circumstances, some life insurance proceeds, including ones payable to beneficiaries other than the deceased individual’s estate, may be considered gross estate for tax purposes.

A Form 706 needs to be filed by an executor if the decedent’s gross estate plus exemptions for taxable gifts is higher than federal estate tax exemption. This form usually has to be filed even if no tax is due although there are some exceptions for transfers for between spouses. The gift tax exemption specifically refers to allowable gifts made by the decadent; the adjustment for taxable gifts refers to any period after the end of 1976. As for the federal estate tax exemption, this amount has significantly increased under the Tax Cuts and Jobs Acts. Limits are adjusted annually for inflation.

Any estate taxes owed when a Form 706 is filed must be paid by the executor within nine months of the estate owner’s death. If more time is needed, a probate and estate administration attorney may recommend seeking an automatic six-month extension. For living individuals wishing to ease post-death tax burdens for loved ones, a lawyer might suggest setting up a trust.