Estates with a total value of more than $1 million may be subject to the District of Columbia estate tax, which is separate (and in addition to) the federal estate tax. The federal tax, though, doesn’t affect estates that are less than $5.43 million (for deaths in 2015).
Which Estates Must File
If you’re a District of Columbia resident and you leave a gross estate with a value of more than $1 million, the personal representative (executor) of your estate must file a DC estate tax return. Even if a return is required, however, the estate may not actually end up owing DC taxes--deductions may reduce the size of the taxable estate below $1 million. All property left to a surviving spouse, for example, is exempt from DC estate tax.
It’s not just DC residents who may owe the district’s estate tax. If you’re a nonresident, your estate may also need to file a District of Columbia estate tax return, if you owned valuable real estate or other tangible assets in the district.
Size of the Estate
Whether or not a District of Columbia estate tax return is required depends on the value of what’s called your gross estate, which includes just about all of your property. It includes these common assets:
- Real estate
- Bank accounts and certificates of deposit
- Investment accounts, stocks, and bonds
- Vehicles and other personal property
- Proceeds from life insurance policies on your life, unless you didn’t own the policy
- Retirement account funds
- Interests in a small business (sole proprietorship, limited liability company, or small corporation)
If you own some of your assets with your spouse or someone else, only the value of your interest will be counted.
Your gross estate also includes assets you hold in a revocable living trust (to avoid probate) or other trusts that you control.
Estate Tax Forms and Deadlines
If an estate tax return must be filed, your executor will have to file it and pay any tax due within ten months after the date of death. After that date, interest begins accruing on any unpaid amounts. The executor can request a six-month extension to file the return, but that extension doesn’t extend the time to pay.
District of Columbia estate tax return forms and instructions can be found at the district’s Office of Tax and Revenue Website. Preparing the tax return, however, will require the help of an expert. Your executor will need to hire an experienced lawyer or CPA and pay the fee from your estate’s assets.