Credits Against the Federal Estate Tax

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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In order to relieve double taxation, there are three credits that offset the federal estate tax liability:

(1) the unified estate and gift tax credit discussed here;

(2) the foreign death tax; and

(3) credit for tax on prior transfers.

A credit is available for foreign death taxes actually paid by the estate on property located in the foreign country that has been included in the gross estate of the decedent which then becomes to federal estate tax. The credit is authorized only by statute or treaty.  The credit is limited to the foreign or the U.S. tax attributable to the property, whichever is less. It is only allowable if the decedent is a citizen or resident of the United States at the time of death.  To support the credit, the executor of the decedent’s estate must file Form 706-CE  and have the form certified by the foreign country to whom the death tax was actually paid.

A credit against the estate tax is allowed for estate taxes paid on property transferred to you while you were living from someone who died within 10 years before or 2 years after your death. There is no requirement that the property be identified in the estate of the transferee or that it even exist on the date of the transferee’s death (Instructions to Form 706). 

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