Estate Tax Exposure Screening

When to run it

Run an estate tax exposure screen whenever there is a material change. Many firms also rerun the screen during annual estate plan reviews so stale values, missed gifts, domicile changes, or portability questions are not carried forward without review.

• Initial planning meeting.
• After a significant change in asset values or ownership.
• After a large gift or inheritance.
• Change in residence or domicile.
• Annual portfolio review.

Review framework

Use a consistent review sequence so material issues are less likely to be missed. The screen should separate facts from assumptions, identify the source for each material input, and show which issues require attorney, tax, valuation, or filing review.

1. 1.

   Collect Facts

   Gather current asset values, ownership, prior taxable gifts, domicile and residence facts, and prior transfer-tax filings.

2. 2.

   Run Exposure Screen

   Measure the facts against current federal and state exemption amounts, filing thresholds, and cliff rules.

3. 3.

   Identify Risk

   Flag potential tax exposure, planning issues, and factual gaps requiring further review.

4. 4.

   Assign Work

   Open follow-up items for valuations, portability, residency, trust review, or return history.

5. 5.

   Schedule Review

   Set the next review date and note interim events that should trigger an earlier update.

State rules vary. Confirm current exemption amounts, filing thresholds, and portability treatment before reaching a conclusion.

What this screen does not decide

An exposure screen helps the responsible attorney decide what needs further review. It should not be treated as the conclusion itself.

• Determine estate tax liability or state inheritance tax liability.
• Replace valuation advice or confirm the value of hard-to-price assets.
• Confirm domicile, residence, property situs, or governing state law.
• Make, preserve, or validate a portability election.
• Replace review of Forms 706, 706-NA, 709, prior transfer-tax filings, or applicable instructions.
• Replace attorney judgment before conclusions are communicated to the client.

Attorney review triggers

The screen should be reviewed by the responsible attorney before client communication when it identifies tax exposure, unresolved facts, or planning assumptions that could affect advice.

• Potential federal or state estate tax exposure.
• Unresolved domicile, residence, or property situs facts, including recent moves, second homes, real property outside the home state, or tangible personal property in another jurisdiction.
• Prior taxable gifts, missing Forms 709, or incomplete transfer-tax filing history.
• Portability or DSUE uncertainty.
• State estate tax, inheritance tax, cliff-regime, or beneficiary-class issues.
• Liquidity concerns, concentrated assets, closely held business interests, or valuation uncertainty.

Federal review

Start with the federal analysis using supportable values, ownership facts, deduction assumptions, and prior transfer-tax history. For U.S. citizens and residents, the Form 706 filing analysis generally turns on the gross estate, adjusted taxable gifts, and any specific exemption. Another reviewer should be able to identify the source of each material input and the basis for each assumption.

• Confirm current asset values, ownership interests, valuation dates, and prior taxable gifts.
• State deduction assumptions, including debt, administration expenses, marital deduction, and charitable deduction positions.
• Flag liquidity concerns involving life insurance, retirement assets, business interests, real estate, or other concentrated assets.

State review

Treat state exposure as a separate legal and tax analysis. A federal no-tax result does not resolve the state question because state estate tax, inheritance tax, filing thresholds, deadlines, deductions, and portability rules may differ from the federal framework.

• Analyze domicile, residence, and property situs separately.
• Confirm whether the jurisdiction imposes an estate tax, inheritance tax, or both, and check the applicable filing threshold, deadline, and beneficiary-class treatment.
• Watch for cliff regimes, state-specific taxable estate adjustments, and portability rules that do not follow the federal rule.

Pay special attention when the client has moved, maintains homes in more than one state, owns real property outside the state of residence, holds tangible personal property in another jurisdiction, or has beneficiaries whose relationship to the decedent may matter under a state inheritance tax regime.

Portability and DSUE

If a prior spouse has died, identify the date of death, whether a timely Form 706 was filed, whether portability was elected, and the amount of any available DSUE. Record whether each figure used in the screen is verified, estimated, or still being confirmed.

Do not rely on DSUE merely because the client was married or a prior estate appeared nontaxable. The file should show the return history and the basis for concluding that the DSUE amount is available for planning or screening purposes.

State portability treatment should be checked separately. Do not carry a federal portability assumption into a state analysis without confirming the applicable rule.

Documentation standard

Retain the screen with its effective date, source documents, material assumptions, known exclusions, and unresolved factual issues. The file should distinguish client-provided facts, attorney assumptions, and calculated output.

The screen is only as useful as the record it leaves for the next reviewer.

Follow-up workflow

Close the review by assigning each open item and calendaring the next refresh date. Common follow-up includes obtaining valuations, reviewing Forms 709 or Form 706 history, confirming title or domicile, verifying portability, and scheduling the annual update.

Material changes in asset value, ownership, domicile, family circumstances, or applicable law should trigger an earlier review.

Review checklist

Use this checklist as a final file-control step after the screen has been reviewed. The goal is to confirm that assumptions, open issues, assigned follow-up, and the next review date are clear before the matter is closed or the client is advised.

• Current asset values, ownership, and valuation dates are documented.
• Prior taxable gifts and available Forms 709 have been reviewed.
• Domicile, residence, and the situs of real and tangible property are confirmed.
• Marital and charitable deduction assumptions are stated.
• Any timely Form 706 portability election and available DSUE amount are documented.
• Potential liquidity concerns and concentrated assets are noted.
• Open factual issues have an assigned owner and follow-up date.

Common questions