IRS Requires Estates To Request Estate Closing Letter

Michel Kitces, on his website, notes that the IRS will cease automatically issuing closing letters for estate tax return filings.  Instead, taxpayers will have to request closing letters for estate tax returns.  Michael’s article begins as follows:

For those who are subject to Federal estate taxes, the estate closing letter is a small but essential step in the process of administering an estate. It affirms that the IRS has reviewed and agreed on the Form 706 estate tax return as filed, and is often the last step for an executor to actually close an estate with the probate court.

However, in recent years the IRS has been forced to issue a rapidly growing number of estate closing letters, not to close out the estates of those who actually have an estate tax liability, but nontaxable estate tax returns that were filed solely for the purpose of claiming portability of a deceased spouse’s unused exemption.

To relieve its own administrative burden, the IRS informally “announced” in a recent update to its Estate Tax FAQ that it will no longer automatically issue an estate tax closing letter at all, and instead will require estate administrators to proactively request the closing letter instead.

For those who merely filed the Form 706 estate tax return to claim portability, this change isn’t necessarily a problem, as few in such situations would have requested (or had any need) for a closing letter anyway. However, for those who do face an estate tax, the new process adds yet another step for the estate administrator to manage. And because the estate closing letter can’t even be requested until four months after the Form 706 is filed, the new rules may force taxable estates to remain open even longer – delaying distributions for beneficiaries and racking up administrative costs – before the estate can finally be closed!

See full article by clicking here.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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