I received this question from A.N., a CPA from Merrick, N.Y., who was preparing a decedent's Federal estate tax return, IRS Form 706, and who wrote:

I always try to include as many deductions as allowed against the gross estate. In addition to the marital and charitable-bequest deductions, and the deduction for mortgages and other debts of the decedent, can you tell me of other deductions available?

Dear A.N.:

I'm able, willing, and glad to assist you!

You've mentioned the three largest deductions generally available to the modest estate. Debts and mortgages may easily exceed $100,000, while any amount greater than the $600,000 credit equivalent is often given in some combination to charity and to the surviving spouse. $600,000 is approximate because it is "net", or after expenses.

Other allowable deductions include those for a funeral or cremation, which charges must be reasonable and often are $8,000 and more. The cost of the casket is deductible and also expenses itemized by the funeral home, such as for removal and preparation of remains, supplied clothing, the service, clergy, pall bearers, printing, transportation, gravesite preparation, and even cash advances for a monument and inscription, gratuities and death transcripts.

Additional deductible expenses are executor or administrator commissions, which are set by statute in New York State and are often waived especially by acting family members, and attorney's fees, which are generally an amount agreed between the estate's representative and the attorney, as a percentage of the gross estate, and are rarely waived. If there is an ancillary probate, customarily for real property located outside of the decedents resident state, there will be another attorney's fee payable. Of course, the accountant's fee is deductible.

Miscellaneous deductible expenses may include court filing fees, copying expense and appropriate toll calls. During administration of the estate, payments for the upkeep of property, such as condominium common charges or co-operative maintenance, real estate taxes, and utilities, are deductible. When disposing of property, expenses for an appraisal, clean-up of debris, and painting and otherwise preparing the property for sale, are deductible. If there is a casualty loss, expenses incurred for investigation and proof are further deductible expenses.

Please recognize that certain of these expenses, such as attorney and accountant fees, are also deductible on the Fiduciary's tax return. During administration of the Estate, these expenses can reduce the Fiduciary's taxable income, which may be payable at a rate exceeding the Estate's. At the close of the administration, these expenses may exceed income and be deductible against regular income of the beneficiary, again payable at a rate exceeding the Estate's.

Finally, an estate may choose a fiscal year-end while most taxpayers must use a calendar year-end, and there are certain tax advantages inherent in this choice including receipt of a bequest at the end of the Estate's year upon which the beneficiary doesn't have to pay tax until April of the following year.

As I've always written here, it's best to consult with a professional to assure yourself the results you intend are obtained. For more information on estate planning issues, pre- or post-mortem, contact an attorney or other professional in your area who specializes in this field.