Estate Closing Letter to Beneficiaries

An estate closing letter to beneficiaries is a letter from the IRS saying that it has received and accepted the estate tax return. You may need to request one for probate or other legal reasons.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

What’s the purpose of an estate closing letter?

An estate closing letter from the IRS tells other people that the estate has met its federal estate tax filing requirements. The letter says that an estate tax return was submitted to the IRS, and the IRS accepted the return.

State Probate

Some states require this letter to close the probate process.

They want to make sure that you’ve met your estate tax obligations because there can be serious legal consequences if you don’t take care of estate taxes before probate is closed.

Surviving Spouse

There is debate over whether a surviving spouse needs to get a closing letter for a deceased spouse’s estate tax return in order to receive the deceased spouse’s unused estate tax exemption.

The IRS sometimes says yes. Tax experts argue that the Internal Revenue Code only requires an estate tax return to be filed.

Talk to an estate planning lawyer or tax accountant if you believe that there’s a chance your estate will be large enough to go over the surviving spouse’s individual exemption.

Federal Estate Taxes

The estate closing letter to beneficiaries generally isn’t required to meet your estate tax filing obligations. It typically only gives peace of mind.

You can confirm that the estate tax return was accepted by requesting an estate tax account transcript from the IRS.

Are there state estate closing letters?

States with estate taxes may also issue estate closing letters. In those states, the probate courts may require a state letter in addition to the IRS letter.

Again, the purpose is to make sure the state takes care of its estate tax obligations before it’s closed.

Some states also impose an automatic lien on a decedent’s property. The lien generally remains in place until the estate pays any estate taxes due and submits the closing letter to release the lien.

What if the estate isn’t subject to federal estate taxes?

If your estate is too small to owe estate taxes, the process varies by state. Some will insist on an IRS closing letter, so you’ll have to file an estate tax return with no tax due.

Other states allow the executor or other responsible party to sign an affidavit saying the estate has no federal estate tax filing requirements.

Does the IRS charge for estate closing letters?

Yes, the IRS charges a $67 fee for estate closing letters.

The fee offsets the cost of people filing estate tax returns even when not required to so they could receive a closing letter.

If you want to avoid the estate tax closing letter fee, check to see if you can provide a copy of the estate tax account transcript instead. There is no charge to access the transcript online.

In some legal settings, the transcript won’t be accepted. That’s because the estate tax closing letter is a certified document from the IRS, while the transcript is something you can print online.

When should you request an estate tax closing letter from the IRS?

The IRS says to wait at least nine months after filing, but your estate tax return is often accepted sooner.

You can check the estate tax return status by checking the online transcript. Transaction code 421 or TC 421 means that the return was either accepted as filed or any examination was concluded.

Note: If you’ve handled an estate in the past, the IRS no longer automatically issues closing letters. You must request the letter and pay the fee to receive it.

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