What You Should Know About Estate Taxes

What is estate tax? As the owner of assets and property, it is a tax on your right to transfer your property when you die. The estate tax consists of an accounting of everything that you own or have interests in on the date of your death.

The fair market of these assets are used, thus, what you paid for them or their value at the time you purchased them isn’t necessarily applicable. The total value of everything that you own or have an interest in is called your “gross estate.” The gross estate includes, but is not limited to:

  • Cash
  • Securities
  • Real estate
  • Insurance
  • Business interests
  • Trusts
  • Annuities

Arriving at Your ‘Taxable’ Estate

Once your gross estate has been calculated, certain deductions are made and in some cases, reductions in value. Once these are deducted, you arrive at your “gross estate.” Such deductions may include: estate administration fees, mortgages, debts, property which passes to your surviving spouse and qualified charities.

Once the net amount has been calculated, the value of all lifetime gifts made since 1977 is added to the number and the tax is computed. Next, the tax is reduced by the unified credit.

Do I have to file an estate tax return?

The majority of estates do not require the filing of an estate tax return. The filing of an estate tax return is only required for large estates with combined gross assets and prior taxable gifts that exceed $5,250,000 in 2013; $5,340,000 in 2014 and $5,430,000 in 2015.

As of January 1, 2011, if a decedent’s estate is survived by a spouse, then the estate may elect to pass the decedent’s unused exemptions to the surviving spouse. However, this election can only be made on a timely filed estate tax return for the decedent who leaves behind a surviving spouse.

For additional information, refer to a probate attorney from our directory!

Categories: Probate, Estate Taxes