What are Estate Taxes?
Federal and state estate tax is a type of tax which is assessed on the value of a decedent’s assets at the time of his or her death. An estate tax is due only if your estate exceeds a certain “exempt amount” at the time of your death. If you own a home and some life insurance and are entitled to retirement plan benefits, the total value of your assets, i.e. your “gross estate” may already exceed the threshold at which estate tax liability begins. Your gross also includes your proportionate interest in any jointly held assets. With proper planning it is possible to minimize estate tax savings. For example, under current law it possible for a husband and wife to avoid federal estate taxes on at least $2 million of their joint gross estates if proper planning is done, thereby preserving their joint estates for the benefit of their children. Depending on the year of your death, the following is a schedule of the exemption for estate taxes.
The US Estate Tax is a tax on the estate (i.e. the property) of a person when they have died. The tax is computed on the value of the estate & owed by the estate. Beneficiaries (i.e. those people that will get the estate’s property) do not owe the estate tax, but they are clearly affected by the estate tax as it reduces the size of the estate. There is an exemption from the Estate Tax, so only large estates are subject to taxation. [For those of you who care: The exemption amount has been going up over the last few years from $1 million in 2001 and will continue to rise to $6.5 million in 2009. In 2010 the Estate Tax is slated to be repealed, but just for the one year. In 2011, the exemption is set to go back to $1 million. Everyone in the know expects something to be done by 2009 to fix this 2009-2010-2011 legal fiasco.
In 2001, Congress passed the Economic Growth and Tax Relief Act. Under the Act, estate taxes are assessed on every decedent’s estate in excess of certain threshold values. This tax is very high. The good news is that estate taxes are calculated on the net value of the estate and not the gross value like probate fees. This means that debts such as a mortgage are taken into account. The bad news is that even though each person is allowed their exemption tax free, married couples are allowed only one exemption for both of them unless they take proper precautions during their joint lifetimes.
Estate taxes, also known as inheritance or death taxes, are taxes imposed on the estate of a deceased individual. They are one of the oldest forms of individual taxation in the western world, with records indicating use as far back as the days of Aristotle. In the modern era, both Britain and the US began imposing estate taxes as early as the mid-18th century. Historically, estate taxes have been a contentious political issue. In the United States, they were initially imposed to help fund the war for independence —- and then quickly repealed. They were subsequently reinstated and repealed on no less than three separate occasions. They were last introduced by the Roosevelt administration during the Great Depression, and in 2001 the US Congress initiated a repeal process that will take until 2010 to complete. At that time, estate taxes will be automatically reinstated the following year unless Congress passes legislation making the repeal permanent. The use of estate taxes varies greatly
