Estate Taxes
The federal estate tax is a tax on your right to transfer property at your death. An “estate”, for purposes of this tax, consists of everything that you own or otherwise have a right to transfer. The value of your assets is the current “fair market value” of those items, not necessarily what they were worth when you acquired them or the purchase price you paid for them. All these items, totaled together, comprise your “gross estate.”
A taxable estate, which (as the name implies) is the amount upon which the estate tax is based, consists of the gross estate less certain deductions. According to the IRS, those deductions may include:
- mortgages and other debts
- estate administration expenses
- property that passes to surviving spouses and qualified charities
Additionally, the value of some business interests or farms may be reduced in some cases.
Federal tax law also allows what’s called a “unified credit.” In 2009, that credit is $3.5 million. In 2010, the credit is unlimited. As a result, most ordinary estates (a/k/a simple estates that include only cash, stocks and small amounts of other easily valued assets) do require the filing of an estate tax return upon the death of the owner.
In some circumstances, careful estate planning may have extra benefits with regard to estate taxes. The law recognizes certain techniques that provide married couples with planning mechanisms to help them retain the credit of the spouse who dies first. As the law currently calls for the unified credit to fall to $1 million in 2011, this type of planning may become relevant for many more married couples. An attorney or tax professional can tell you more about planning to minimize estate tax liability.
This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. United Financial Systems, Corporation is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.