Estate Taxes

Estate taxes can feel like a problem reserved for the ultra-wealthy, but the reality is more nuanced. A single piece of real estate that has appreciated for decades, a closely held business, a family cabin that keeps rising in value, or a life insurance policy owned the wrong way can push an estate into complicated territory. Even when no federal estate tax is ultimately due, the process of valuing assets, filing the right returns, making elections, and responding to IRS questions can be stressful for families and fiduciaries who are already managing a difficult time.

Frazier Law helps individuals, families, executors, trustees, and business owners address estate tax exposure and estate tax administration issues with a practical strategy and a tax controversy mindset. Led by principal attorney Charles R. Frazier and certified public accountant (CPA) Rick Miller, our firm has been helping people since 2009 with tax controversies and IRS defense. We are a multi-state practice with federal authority and licenses in Tennessee, Michigan, and Texas, and we handle complex federal tax matters regardless of location. Charles is a former IRS agent and holds an LL.M in Taxation from The University of Alabama in Tuscaloosa. He is also a Chartered Financial Consultant (ChFC) through The American College of Financial Services.

What Estate Taxes Really Mean

Estate tax is a federal transfer tax that may apply when a person dies and transfers assets to heirs or beneficiaries. It is separate from income tax. An estate may have to deal with several tax categories at once, and that is where the work often becomes complicated.

An estate can face final individual income tax issues, income tax for the estate or a trust during administration, gift tax issues from lifetime transfers, generation-skipping transfer tax concerns, and federal estate tax filing requirements. In some situations, state estate or inheritance taxes also come into play, depending on where the decedent lived, where property is located, and what state rules apply. Each category has different deadlines, different forms, and different strategic decisions.

The key is that “estate taxes” often refers to more than whether the estate pays a federal estate tax bill. Many families benefit from careful planning and administration even when the estate is not expected to owe estate tax, because elections and valuation positions can have major downstream consequences for heirs.

Federal Estate Tax vs State Estate and Inheritance Taxes

The federal estate tax is administered by the IRS. It typically applies only when the taxable estate exceeds a threshold set by Congress, and that threshold has changed frequently over time. Some states impose their own estate tax, and a smaller group of states impose inheritance taxes that depend on the relationship between the decedent and the beneficiary. It is also possible for a person to live in one state but own real estate, a business interest, or other property in another state, which can create additional filing and compliance issues.

Because rules vary widely, it is risky to assume that a federal non-issue means the family has no estate tax exposure. Part of our work is confirming which jurisdictions matter and identifying which filing and planning decisions actually move the needle.

The “Taxable Estate” Is Not the Same as “Everything They Owned”

The starting point is the gross estate, which generally includes assets owned at death and certain assets treated as owned at death under federal rules, such as some transfers with retained interests, certain trust assets, and other inclusion rules. From there, deductions and elections may reduce the taxable estate.

Common deductions can include administrative expenses, debts, mortgages, certain charitable transfers, and marital transfers to a surviving spouse, if structured properly. The details matter. A deduction that looks obvious on paper can be lost if documentation is missing or if the legal structure does not support the intended tax outcome.

When Estate Taxes Become a Risk

For many families, the biggest “estate tax surprise” comes from valuation. Real estate appreciation, a fast-growing company, concentrated stock positions, or significant retirement assets can push the estate’s value higher than expected. Another common trigger is a blended family plan or an outdated plan that never accounted for growth, new assets, or changing tax laws.

We often see estate tax risk emerge in these situations.

Closely Held Businesses and Professional Practices

Businesses are among the most difficult assets to value. The IRS scrutinizes closely held business valuations because small changes in methodology can produce large swings in value. Discounts for lack of control and lack of marketability may apply in some situations, but they must be supported and defensible. Succession planning, buy-sell agreements, and entity structures can also affect tax outcomes, sometimes in ways that surprise the family.

High-Value Real Estate and Multi-State Property

Real estate often becomes the largest part of an estate. Valuation depends on appraisals, comparable sales, and the facts of the property. Vacation property, rental portfolios, farmland, and development land present added complexity. Multi-state ownership can create extra layers of administration and may require coordination across professionals.

Trust Structures That Do Not Match the Family’s Current Goals

Trusts can be excellent tools, but they are not “set it and forget it” documents. Old irrevocable trusts, bypass trusts, and life insurance trust structures may be out of sync with current tax rules or with the family’s intentions. Sometimes the trust design creates unintended estate tax inclusion. Other times, it creates administration burdens that the family can simplify with careful planning, decanting strategies where allowed, or coordinated updates.

Prior Gifts, Gift Tax Returns, and Lifetime Transfers

Estate tax work often requires reconstructing a lifetime of transfers. Gift tax returns, prior taxable gifts, and lifetime use of exemptions can affect what is available at death. If gift tax reporting was incomplete or inconsistent, the estate may inherit those issues and the executor may need to address them before finalizing the estate tax picture.

The Estate Tax Return and Administration Process

Even when no estate tax is expected, the federal estate tax return may still be required depending on the estate’s size, the decedent’s past transfers, and the planning strategy used. When a return is required, the executor has serious responsibilities.

Determining Whether a Return Is Required

A common misconception is that “only the very wealthy file.” In reality, a return can be required in more situations than people expect, and sometimes a return is filed voluntarily to preserve an election that can benefit the surviving spouse or the heirs. This is an area where individualized guidance matters. Filing a return without a plan can create unnecessary exposure, but failing to file a return when an election is needed can permanently close the door on valuable options.

Valuation, Appraisals, and Documentation

The estate tax return is heavily driven by valuation. For marketable securities, the process may be straightforward. For real estate, businesses, and unique assets, valuation becomes a project.

A defensible estate tax position is built on documentation. Appraisals, partnership agreements, operating agreements, loan documents, corporate records, accounting records, and evidence of market conditions all matter. The IRS does not evaluate the estate based on what the family “meant.” It evaluates based on what the documents and the law support.

Key Elections and Planning Decisions During Administration

Some of the most important estate tax decisions happen after death. These decisions can affect whether assets receive a basis adjustment, how income is taxed during administration, how distributions should be timed, and whether deductions are optimized.

Executors may need to coordinate with beneficiaries, trustees, appraisers, and accountants to make elections that align with the plan and reduce unnecessary tax cost. The right decision depends on the assets, the family’s goals, and the projected administration timeline.

Common Estate Tax Mistakes That Create IRS Exposure

Estate tax disputes often arise from preventable mistakes. A few patterns come up repeatedly.

First, families sometimes rely on informal valuations or “online estimates” for real estate and business interests. Second, the estate may overlook assets that are includable even if they do not pass through probate, such as certain trust assets or beneficiary-designated accounts with inclusion rules. Third, documentation gets lost or never gathered, which makes it difficult to defend deductions and valuation positions. Finally, the estate may miss deadlines or fail to request extensions properly, creating penalties and interest that could have been avoided.

Frazier Law approaches these issues with the mindset of a tax controversy firm. We help clients identify weaknesses early, strengthen documentation, and choose a strategy that can withstand scrutiny.

IRS Estate Tax Audits and Disputes

An estate tax return can be selected for review for many reasons, including the size of the estate, valuation issues, unusual deductions, or inconsistencies with prior filings. Even smaller estates may be examined if the IRS sees red flags.

What the IRS Looks for in Estate Tax Examinations

Valuation is the centerpiece. The IRS may challenge appraisal assumptions, business valuation methods, and discounts applied to closely held interests. The IRS also evaluates claims for administrative expense deductions, debts, charitable deductions, and marital deductions, especially when documentation is thin.

The IRS may request records, appraisals, bank statements, property records, trust instruments, and communications that support the estate’s position. How you respond matters. A disorganized response can expand the scope of the audit and prolong the process.

Resolving Disputes Through Negotiation, Appeals, and Litigation Support

Many estate tax disputes are resolved through professional negotiation and substantiation, but some require escalation to IRS Appeals or litigation support. A strategic approach focuses on the legal standards, the strength of the evidence, and the cost-benefit of each path.

Because Charles Frazier is a former IRS agent, our firm understands how examinations are built and how valuation disputes evolve. We work to present the estate’s position clearly, reduce unnecessary friction, and pursue resolution that protects the estate and the fiduciary.

Special Estate Tax Issues for Business Owners and High-Net-Worth Families

Estate tax planning is rarely just about a number. It is about control, liquidity, family dynamics, and risk management.

Liquidity Planning for Estate Tax and Administrative Costs

Some estates are “asset rich and cash poor.” A family may inherit substantial value in real estate or a business, but not enough liquid cash to pay expenses, taxes, and debts. That can force a sale at the worst possible time.

Liquidity planning can include reviewing entity structures, insurance ownership, distribution strategies, and the timing of asset sales. The goal is to avoid a fire sale and preserve the family’s long-term plan.

Coordinating Estate Tax With Trust and Beneficiary Designations

A will and trust plan must coordinate with beneficiary designations on retirement accounts, life insurance, and payable-on-death accounts. Mismatches are common and can cause unintended tax and distribution outcomes. Estate tax planning should also consider who controls assets, who receives income, and who bears the burden of expenses and taxes. These decisions can be addressed in planning documents, but they need to be reviewed periodically.

Generation-Skipping and Multi-Generational Transfers

Families who want to leave assets to grandchildren or later generations may need to consider generation-skipping transfer tax rules. Planning can involve trusts, allocation strategies, and careful drafting. Even when a family is not focused on multi-generational planning, GST issues can arise unintentionally when beneficiaries are young, when trusts are structured for decades, or when contingent beneficiary plans are not reviewed.

How Frazier Law Helps With Estate Taxes

Estate tax work sits at the intersection of tax law, accounting, valuation, and careful administration. Frazier Law’s structure is designed for that reality. Our leadership includes an attorney with deep federal tax training and IRS experience and a CPA who understands the financial mechanics behind estate and trust reporting.

We assist with evaluating estate tax exposure, designing strategies to reduce avoidable tax cost, coordinating with estate planning counsel where appropriate, preparing and supporting filings and elections, and handling IRS disputes. We also help executors and trustees understand their responsibilities and document decisions so they can administer the estate with confidence.

Estate Tax Planning Before Death

Proactive planning creates options. Depending on the family’s goals and asset structure, planning may include reviewing existing trusts, evaluating lifetime transfer strategies, coordinating business succession plans, and identifying exposure points that could create IRS scrutiny later.

The right plan is not generic. It should reflect the family’s objectives, the nature of the assets, and the realities of administration after death.

Estate Tax Support After Death

After a death, families often need immediate guidance. Executors must gather records, safeguard assets, coordinate appraisals, understand deadlines, and determine what returns are required. Decisions made in the first few months can shape the outcome for years.

We help families and fiduciaries move through administration with a structured plan, a defensible documentation strategy, and a clear approach to IRS communication when needed.

Why Clients Choose Frazier Law

Tax controversy experience matters in estate tax work because estate tax is not just paperwork. It is a legal position that must hold up under IRS review. Frazier Law has been helping people since 2009 with tax controversies and IRS defense. Our multi-state practice and federal authority allow us to assist clients across the country, including those with assets in multiple jurisdictions.

Charles R. Frazier’s background as a former IRS agent and his LL.M in Taxation from The University of Alabama in Tuscaloosa provide strong grounding in federal tax analysis. His ChFC designation adds depth in financial planning concepts that often intersect with estate and wealth strategies. With CPA Rick Miller involved in the firm’s work, clients receive support that recognizes both the legal and financial dimensions of estate taxes.

Speak With Frazier Law About Estate Taxes

If you are concerned about estate tax exposure, if you are an executor facing filing requirements and valuation issues, or if you have received IRS correspondence about an estate or trust matter, Frazier Law can help you take control of the situation. The earlier you address estate tax risk, the more options you typically have, and the easier it is to avoid expensive mistakes.

Frazier Law assists clients nationwide with complex federal tax matters and estate tax issues, with licensing in Tennessee, Michigan, and Texas. Contact our office to discuss your circumstances and learn how we can help you protect your family, your business, and your legacy.