For deaths in 2017, estates with a total value of more than $5.49 million may be subject to the Delaware estate tax. (The exempt amount for 2016 was $5.45 million; the state exemption amount changes with the federal estate tax exemption amount.)
Your estate could owe Delaware estate tax even if you’re not a state resident. If you own valuable real estate in Delaware or have other tangible assets there, your estate will have to file a return.
Note: Under a "sunset" provision in prior law, the Delaware estate tax was to have ended on July 1, 2013. In March of 2013, the state legislature passed legislation repealing the sunset provision.
Under current law, if you leave a gross estate worth more than $5.49 million, your executor will have to file a Delaware estate tax return. The gross estate includes just about everything you own at death. It doesn’t matter, for tax purposes, whether or not an asset goes through probate.
Your gross estate includes:
For assets that you own jointly with someone else, only your interest is included. For example, if you and your spouse own a house together, half of its value would be included in your estate.
Not all estates that must file a tax return end up owing Delaware estate tax. That’s because a number of deductions, subtracted from the gross estate, can reduce the size of your taxable estate. And if the value of the taxable estate is less than $5.49 million, no estate tax will be due.
The most common and important deduction comes from the fact that all property left to a surviving spouse is exempt from state estate tax. So if you leave everything to your spouse, no estate tax (state or federal) will be due. The value of certain farmland can also be deducted.
If a Delaware estate tax return is necessary, it’s the job of your executor to file it and to pay (from estate assets) any tax due. The deadline is nine months after the date of death, unless the state grants an extension.
Delaware estate tax return forms and instructions can be downloaded from the state’s Division of Revenue website. But your executor will need to hire expert help, probably from an experienced estate administration lawyer, to prepare the return. The expert’s fee can be paid from the estate's assets.