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Tax Tips for Surviving Spouses

How to pass on more than $10 million estate-tax-free.

Nothing may be certain but death and taxes, but the tax man is immortal. You’ll need to report your spouse’s income on final federal and state tax returns (they can be joint returns) for the year of death. The estate may have to file returns, too, if it receives much income before it’s settled.

If your spouse passes away, estates with a gross value exceeding the federal estate tax exclusion — $5.45 million in 2016 — must file an estate tax return even if no taxes are owed after deductions. You may want to file a federal return for smaller estates, though. Only by doing so can you add your spouse’s $5.45 million ex­clusion to your own, allowing you to pass on more than $10 million estate-tax-free. If there’s any chance you might accumulate more than $5.45 million in assets (by winning the lottery, maybe), you’ll want to preserve this option. A few states require state estate tax returns, too.

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