Q: I have a living trust and am getting different opinions from friends about whether or not I needed to file an estate tax or death tax return after my husband passed 6 years ago. I am very confused. Thanks for any help you can give me. Some say it is not necessary if you have a trust.
Betty, Elk Grove
A: I am sure it must be confusing to get conflicting advice from well-meaning friends.
However, the determining factor about whether to file an estate tax return is not whether the person died with a trust. Rather, the determining factor is what is the total gross value of that person's estate, including assets held in trust, outside of trust, IRAs, life insurance, annuities, etc. It would also include any prior taxable gifts, for example, if you and your husband made a large gift above the allowable annual exclusion amount to your children.
If your husband died in 2007, then an estate tax return would be required if the total gross value of his estate is more than $2 million. If all of the assets owned by you and your husband at the time of his death were your community property, then your total combined estate would have to be more than $4 million for an estate tax return to be required.
Let's say, however, that your husband had separate property of $1 million and you and he together owned community property assets totaling $3 million. Then an estate tax return would be required for your husband because the total value of his estate would exceed $2 million ($1 million separate property plus $1.5 million share of community assets).
In either case, you might want to have an attorney review your trust to be sure that there are no other requirements which should have been followed after your husband's death.
For example, some trusts require that there be a division of assets on the death of the first spouse. You will want to be sure that you, as trustee, have complied with any provisions of the trust which were established at the time it was executed by you and your husband.