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A change in procedures by the Internal Revenue Service could cause delays for beneficiaries of estate assets in Florida. Previously, the IRS would automatically send a closing letter to an estate executor after they had filed Form 706. Once the closing letter was received, the estate executor could begin dispersing the remainder of the estate’s assets. Now, executors must make a special request for a closing letter, and they have to wait four months after filing Form 706 to make their request.
The change in IRS procedure is reportedly due to an influx of estate tax returns from spouses taking advantage of the new portability rules. Even if there are no estate taxes due to the IRS, estates must file a tax return if they are using portability. The increase in estate tax returns was too much for the IRS to handle, so the formerly routine closing letters must now be specifically requested.
Estates that do not owe any estate tax will not be affected by the procedural change. If an estate owes estate tax, the executor may have to wait longer than the customary four months to make distributions to beneficiaries. The IRS will generally issue a closing letter after four months, but it could take longer if the Form 706 is being examined for fraud or error.
An attorney may be able to help an individual or couple to use estate planning tools to reduce their estate tax liability. Many people are able to shield their estate from taxation using trusts that can benefit them during their lifetime and then be passed to heirs.