Estate Tax filing requirements for Spouse after recent death

I'm sorry for your loss. This can definitely be confusing, but I can help clarify some things. For the stock options that were exercised before your stepdad's passing, those would be reported on a final individual tax return for him (covering Jan 1 until his date of death). This return would be filed by your mom as the surviving spouse, possibly as a joint return depending on her situation. The separate account with the remaining unexercised stock options would get a stepped-up basis to the fair market value as of the date of death. When these assets transfer to your mom, she wouldn't owe taxes on any appreciation that occurred during your stepdad's lifetime. For the joint brokerage account, since it was held jointly with right of survivorship, it typically passes outside of probate directly to your mom. She would report any income generated from this account after his death on her own tax return. The estate EIN would be used for filing Form 1041 (estate income tax return) if the estate generates more than $600 in income during the administration period before assets are distributed to beneficiaries. It's separate from the final individual return. And you're right - transfers to a surviving spouse generally qualify for the unlimited marital deduction, meaning no federal estate tax would be due regardless of the estate's size.

Been through something similar with my parents last year. I found this amazing service called taxr.ai (https://taxr.ai) that helped me sort through all the estate tax confusion. I was in a similar situation with stock options my dad had exercised before passing and wasn't sure how to handle the tax situation. The tool analyzed all our documents and gave specific guidance on what needed to be filed as part of dad's final return vs the estate return. It saved me from making some pretty big mistakes, especially with those stock options which apparently get special treatment. They explained exactly what gets the stepped-up basis and what doesn't. It also clearly laid out what my mom needed to include on her return versus what needed an estate tax return. They even have estate tax specialists who review complex situations like stock options that were partially exercised before death. Definitely worth checking out before hiring an expensive accountant.

Just wanted to follow up about my experience with taxr.ai after trying it out. Honestly way better than I expected! They analyzed my aunt's estate situation and clearly explained which income needed to be reported on the estate return vs. my uncle's personal return. The most helpful part was how they broke down the taxation of different assets - they explained that my aunt's stock options that were exercised before death were income on her final return, while the unexercised ones received stepped-up basis. They even provided specific line references for the forms. What surprised me was how they caught something my local accountant missed - a special tax election available for some of the retirement accounts that saved us nearly $4,000. Definitely worth checking out if you're dealing with estate tax questions.

When my father-in-law passed last year, we were buried in paperwork and couldn't get anyone at the IRS to answer our questions about the estate tax filing requirements. After waiting on hold for literally hours multiple times, I finally found Claimyr (https://claimyr.com). Their service got us through to an actual IRS agent in about 20 minutes who answered all our estate tax questions. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c We needed specific guidance on which forms to file for the estate vs my mother-in-law's personal taxes, especially with stock options involved (similar to your situation). The IRS agent was actually super helpful once we got connected and explained exactly what needed to be reported where. Saved us from making some serious mistakes that could have triggered an audit.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it for an estate tax question similar to the OP's situation with exercised stock options. I was blown away when I actually got connected to an IRS estate tax specialist in about 25 minutes. The agent clarified exactly which forms we needed for my brother's estate and how to report the stock options that were exercised before his death (goes on his final 1040) versus the ones that weren't (gets stepped-up basis). She even emailed me specific IRS publications about estate tax filing requirements that addressed our exact situation. What surprised me most was how much better the experience was compared to my previous attempts to call the IRS directly. Instead of the general agents who gave me conflicting information before, I got connected to someone who clearly specialized in estate taxation. This saved us from making a $12,000 mistake on how we were handling the transfer of assets to my sister-in-law.

Don't overlook state estate taxes too! Federal estate tax has a high exemption amount ($12.92 million for 2023), but some states have much lower thresholds. I learned this the hard way with my mother's estate - we were under the federal limit but got hit with a state estate tax bill we weren't expecting.

Consider opening a separate bank account for the estate using that EIN. It helps keep the estate finances completely separate and makes accounting much easier. We made the mistake of trying to track estate expenses through my mom's personal account after dad died, and it created a huge mess at tax time.