If you're an estate planning attorney in Maryland, you know the drill. You drafted the will or trust beautifully. You walked the family through the probate process. You advised on asset titling and charitable bequests. Then someone asks: "Who's filing the 706?" Maybe you can prepare it. Maybe you used to. But increasingly, the smart move is to refer that work to a CPA who specializes in estate and trust tax compliance — and to do it before the deadline panic starts.
Here's why, what you should know about Forms 706, 709, and 1041, and how a clean attorney–CPA partnership protects your clients and your practice.
Why Attorneys Are Referring Estate Tax Work Out
Three trends in the last decade have made the tax-compliance side of estate work harder for general estate planning practices to handle in-house:
1. Form complexity has increased. Schedule M elections, portability questions, basis step-up reporting, and DSUE calculations have become more technical. The IRS has also been more aggressive about reviewing 706 filings, especially around hard-to-value assets like closely-held businesses, real estate, and intellectual property.
2. Software costs and learning curve are real. Maintaining a proper 706 / 1041 software subscription and staying current on the rules is genuinely expensive for an attorney's office that may only file a handful of returns per year.
3. Malpractice exposure on the tax side is its own animal. Most attorney malpractice carriers price tax-preparation work differently from legal work. Filing a deficient 706 isn't just a tax problem — it can create personal liability for the executor and trustee, which leads to claims against the preparer.
A reliable CPA partner solves all three problems. You stay in your wheelhouse (legal). They stay in theirs (tax). Your clients get specialists on both sides. And your malpractice profile gets cleaner.
The rest of this post covers the three key federal forms that come up most often in Maryland estate practice, plus the Maryland-specific filings that go with them.
| Form | What It Is | When Filed |
|---|---|---|
| 706 | Federal estate tax return | Once, 9 months after death (6-month extension available) |
| 709 | Federal gift tax return | April 15 following any year a reportable gift is made |
| 1041 | Income tax return for estates and trusts | Annually, for every year the estate or trust has reportable income |
Form 706: The Federal Estate Tax Return
Form 706 is the federal estate tax return. It's required when a decedent's gross estate plus adjusted lifetime taxable gifts exceeds the federal estate tax exemption in effect on the date of death.
- Date of deathClock starts
- 9 monthsForm 706 due
- 15 monthsWith the automatic 6-month extension (Form 4768)
Filing threshold: The anticipated TCJA sunset never happened — the 2025 federal tax law instead set the exemption at $15 million per decedent beginning in 2026, indexed for inflation going forward. As always, the figure that controls is the exemption in effect for the year of death.
Even when not required, 706 may be advisable. Surviving spouses often want to elect portability of the deceased spousal unused exclusion (DSUE). To preserve that election, you must file a 706 timely — even if the estate is well under the filing threshold. This is one of the most common reasons we get late-stage panic calls from attorneys: a surviving spouse needs the DSUE election preserved, and the original CPA didn't file because "nothing was owed."
Filing deadline: 9 months from the date of death, with one automatic 6-month extension available (Form 4768). Missing the original deadline doesn't kill the return, but it can compromise certain elections (notably the alternate valuation date election and the portability election if you're past the late filing relief window).
Maryland's separate estate tax. Maryland is one of the few states that still imposes its own estate tax in addition to the federal regime. The Maryland exemption is $5 million per decedent (for deaths in 2019 and after), and the top Maryland rate is 16%. If a decedent's Maryland-situated estate exceeds $5M, Maryland Form MET-1 is required even if the estate is well below the federal threshold. With the federal exemption now at $15 million, the gap between the two systems is wider than ever — many estates owe Maryland estate tax while owing zero federal estate tax. Easy thing to overlook.
Common 706 complexities that benefit from CPA specialization:
- Closely-held business valuations and discounting
- Real estate appraisals and partial interest discounts
- QTIP (Qualified Terminable Interest Property) trust elections
- Marital deduction planning when the estate includes non-citizen spouses
- Generation-skipping transfer (GST) tax allocations
- Charitable deduction limitations and split-interest trusts
- Section 6166 election (deferred payment for closely-held businesses)
- Section 2032A special-use valuation for farms and family businesses (relevant in Frederick County agricultural estates)
When attorneys should consider referring 706 work:
- The estate has closely-held business interests
- The estate exceeds the Maryland threshold but not the federal threshold (Maryland-only estate tax work is its own specialty)
- A DSUE / portability election is at stake
- The estate includes hard-to-value assets requiring appraisals
- The decedent had complex lifetime gifting (cross-references to historical 709 filings)
Form 709: The Federal Gift Tax Return
Form 709 is the federal gift tax return. It's required when a donor makes gifts to a single recipient in a calendar year that exceed the annual gift tax exclusion — or whenever any gift of a "future interest" is made, regardless of amount.
Annual exclusion: $19,000 per recipient for 2025 and 2026 (indexed periodically).
Maryland has no separate gift tax. This is one of the few areas where Maryland tax planning is simpler than federal. Lifetime gifts that exceed the federal exclusion file a federal 709, but no Maryland return is required for the gift itself. However, those gifts will count when calculating the Maryland estate tax at the donor's eventual death.
Common 709 scenarios that need CPA involvement:
529 plan front-loading
Five-year front-loading of 529 contributions (e.g., $95,000 from one donor or $190,000 from a married couple at current exclusion levels) requires a 709 election. Many parents don't realize they need to file when they front-load.
Business succession transfers
Stock or LLC interest gifts to family members, especially with valuation discounts applied
Irrevocable trust funding
Crummey powers, Spousal Lifetime Access Trusts (SLATs), and Intentionally Defective Grantor Trusts (IDGTs) all generate gift tax events
Charitable lead trusts and charitable remainder trusts
Both require careful 709 reporting
Intra-family loans below market rate
Imputed gift treatment requires reporting
GST allocations
Even when the gift itself doesn't exceed the exclusion, GST election strategy may need to be reflected on a 709
Filing deadline: April 15 of the year following the gift, with automatic extension available alongside a Form 4868 personal return extension.
Form 1041: Income Tax Returns for Estates and Trusts
Form 1041 is the federal income tax return for estates and trusts. Unlike the 706 (filed once after death) and the 709 (filed when a gift triggers it), the 1041 is an annual filing requirement during the period an estate is being administered or a trust is in existence and generating taxable income.
When 1041 is required:
Estate administration
An estate that earns more than $600 in gross income during a tax year must file a 1041. The estate's "tax year" begins on the date of death and ends when the executor closes the estate (typically 12–24 months later, sometimes longer).
Trusts
Most non-grantor trusts must file annually if they generate gross income of $600 or more, OR if they have a non-resident alien beneficiary.
Grantor trusts
Generally do NOT file their own 1041. Income is reported on the grantor's personal 1040. (Some grantor trusts file an informational 1041 noting grantor trust treatment.)
Maryland counterpart: Maryland Form 504 is the state fiduciary income tax return, filed on a similar schedule as the federal 1041.
Why 1041 work matters for ongoing client relationships:
- Estates often have 1–2+ annual 1041 filings before final distribution
- Long-term trusts (revocable-trusts-turned-irrevocable at death, IDGTs, SLATs, dynasty trusts, charitable remainder trusts) require 1041 filings for years or decades
- Beneficiaries receive Schedule K-1s reporting their share of trust/estate income — and those K-1s flow to their personal returns
- Distribution decisions (which income flows out to beneficiaries via DNI vs. retained by the trust) are tax planning decisions, not just compliance
Critical 1041 considerations:
DNI (Distributable Net Income)
calculations control how income is allocated between trust and beneficiaries
65-day rule
Distributions made in the first 65 days of a tax year can be elected as if made in the prior year — significant planning lever
Compressed brackets
Trusts hit the highest federal bracket at very low income levels (roughly $15,000–$16,000), making distribution strategy material to overall tax
State sourcing
Maryland-source income to a trust with non-Maryland beneficiaries triggers state filing complexity
Net Investment Income Tax (NIIT)
Trusts hit NIIT at very low thresholds, which factors into investment management
This is recurring annual work that benefits both the attorney (consistent client touchpoint without billable tax work) and the CPA (year-over-year relationship with the trustee). Learn more about our estate and trust tax services.
Maryland-Specific Considerations Attorneys Should Know
Maryland inheritance tax (separate from estate tax). Maryland is one of only a handful of states that still imposes an inheritance tax. It applies at a 10% rate to property passing to most non-exempt beneficiaries. Key exemptions: spouses, children, parents, siblings, grandparents, lineal descendants, charities, and a few others. Property passing to nieces, nephews, friends, or unmarried partners triggers the 10% inheritance tax. This is in addition to the Maryland estate tax (if any). Both can apply.
Maryland fiduciary income tax brackets track Maryland personal income tax brackets, with the top rate at 5.75% (state) plus the applicable local rate for the fiduciary.
Frederick County agricultural estates. Family farm estates in Frederick, Carroll, and surrounding counties can qualify for Section 2032A special-use valuation, reducing federal estate tax by valuing farmland at its agricultural use rather than highest-and-best-use. This is a real planning opportunity that requires careful coordination between the attorney drafting the estate plan and the CPA filing the 706.
How CPA–Attorney Partnerships Work (Cleanly)
The best attorney–CPA partnerships work because the roles are clearly defined and neither side encroaches on the other.
The attorney handles:
- Will and trust drafting
- Probate court filings
- Beneficiary disputes and litigation
- Legal advice on estate plan structure
- Powers of attorney, healthcare directives, guardianship matters
- Real estate transfers and title work
- Business succession legal documentation
The CPA handles:
- Forms 706, 709, 1041 preparation and filing
- Maryland MET-1 and Form 504 preparation
- Inheritance tax calculations and filings
- Asset valuations and appraisal coordination (or working with the appraiser the attorney recommends)
- DNI and distribution strategy
- K-1 issuance to beneficiaries
- Beneficiaries' personal returns (when the CPA also handles them)
- Annual fiduciary income tax compliance for ongoing trusts
The shared territory (where coordination matters most):
- Initial estate plan structuring — modeling federal and Maryland estate tax exposure
- Lifetime gifting strategy — timing, GST allocation, valuation
- Trust funding decisions — which assets go into which trust
- Distribution planning during administration
- Coordinating with executor/trustee on tax payments and timing
We've worked with attorneys across Frederick County and central Maryland for decades. The partnerships that work best are ones where both sides communicate clearly, where each professional respects the other's expertise, and where neither attempts to do the other's job.
What Makes Mercer Flanagan's Estate & Trust Tax Practice Different
Most CPA firms accept estate and trust work but treat it as secondary to their bread-and-butter 1040 and business tax practice. Estate and trust tax work is a genuine specialty for us. Established in 1971, we've handled thousands of fiduciary tax engagements across Maryland. Specifically:
We file Maryland MET-1 returns regularly
most Maryland CPAs see one a year (if that)
We have specific expertise in 706 portability filings
even for non-taxable estates
We handle multi-year 1041 administration
for trusts and estates that span tax years
We don't offshore preparation
Every estate and trust return is prepared in-house in Frederick, MD by experienced CPAs.
We coordinate with attorneys, not compete
We don't draft wills or trusts. We don't advise on legal structure outside our expertise. We refer clients back to their attorneys for legal questions and we expect attorneys to refer back to us for tax questions.
If you're an estate planning attorney in Frederick County, Montgomery County, or anywhere in central Maryland — and you'd like to discuss a referral partnership — we'd welcome the conversation.
We're happy to start with a no-obligation introductory call where we share how our practice handles 706, 709, and 1041 work and learn about your firm's preferred referral process. References from current attorney partners available on request. Call 301-662-6992.
Frequently asked questions
Often, yes. If the Maryland-situated estate exceeds $5 million, a Maryland MET-1 is required even with zero federal liability. And if there's a surviving spouse, a timely 706 may still be worth filing to preserve the DSUE portability election.
