Estate taxes are commonly referred to as “the death tax.” While it’s quite a morbid term, it’s something you need to be prepared for. Will your loved ones be prepared to pay the tax expenses when you pass away? Do you know the value of your estate? These are important questions when concerned about the estate tax.
The estate tax, also known as the death tax, is the tax the government imposes on the transfer of the taxable estate of a deceased person to any beneficiaries. The taxable estate is derived after certain deductions are removed from the gross estate amount (some deductions may include mortgages, estate administration expenses, etc).
When assessing the estate tax, any property or assets that are being taxed will be valued at the fair market price. This means they will be taxed for what they are valued at, not at the price you paid for it. Keep this in mind when evaluating your assets.
The federal government also allows for a base amount to be tax exempt. As of 2015, any estate valued lower than $5.43 million dollars are considered exempt from the estate tax. However, any excess amount over this limit will be taxed at the current year’s rate of 40%. The exclusion amount limit and tax rate change almost every year, so it is a good idea to keep in touch with a professional to ensure you are up to date with the current numbers and to check how the changes may affect your estate.
When dealing with taxes from the federal government, there are a lot more rules and exceptions that can hurt or help you. It is important to contact your attorney for complete information and guidance over the protection and well being of your or your loved ones estate.