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Form 8971 Guidance for Executors

Posted on: March 30th, 2016
probate helpA new federal tax form is causing reporting and tax confusion for executors. Form 8971 Information Regarding Beneficiaries Acquiring Property From a Decedent, is prompting some executors to seek counsel to determine whether the form is required for the estate they are administering and, if so, how to properly complete the form. Depending on the date of death, many Form 8971 documents have a filing deadline of March 31st. (Going forward, the forms are due within 30 days following the estate tax return deadline.) 

According to Forbes, executors’ challenges remain even following the release of the IRS guidance documents. Duplicate reporting to multiple beneficiaries, reporting of transfers, and cost basis valuations are a few of the issues to consider during the estate administration. 

Another factor causing concern for executors as well as estate beneficiaries is that Form 8971 is due before final determination may have been made regarding which assets will be included in distributions to particular beneficiaries. In essence, the Form 8971 acts as an inventory. If the ultimate asset transfers don’t match the initial Form 8971, the executor will need to file a supplemental form at a later date. Thus, the initial reporting to beneficiaries and the actual transfer of assets might not match, which could upset some beneficiaries if they anticipate receipt of the assets noted on the initial form.

Executors in North Carolina seeking help with Form 8971 can contact our tax firm in Chapel Hill. Very few resources are presently available to assist executors with understanding the new rules and completing the form correctly. It remains to be seen if additional guidance will be issued. To stay updated about clarification of the Form 8971 – subscribe to our tax law blog, and follow our attorneys on Twitter @estateplansnc and Facebook.

Note that the Form 8971 is mandatory for all estate tax returns that were filed on an after July 31, 2015, unless the executor has filed solely to elect portability on behalf of a surviving spouse or to make a election regarding Generation-Skipping Transfer Tax. Verify with a tax attorney whether Form 8971 is required to be filed for an estate that you are administering to avoid error. 

By Attorney Samantha Reichle

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