of whether the assets have been through probate, is subject to estate taxes.
Also referred to as the “death tax,” the estate tax was first enacted in this country with the Stamp Act of 1797 to help pay for naval rearmament. After several repeals and reinstatements, the Revenue Act of 1917 put the current estate tax into place. Despite its
long history, this tax remains controversial.
The IRS calculates the estate tax due on your gross taxable estate by adding the value of your assets and then subtracting any applicable exemptions.
The most common exception to the federal estate tax is the unlimited marital deduction. The government exempts all transfers of wealth between a husband and wife from federal estate and gift taxes, regardless of the size of the estate. Of course, the surviving spouse must be a U.S. citizen to qualify for this exemption. When the surviving spouse dies, the estate will be subject to estate taxes and, unless the appropriate preparations have been made, only the surviving spouse’s applicable credit can be used. Other exemptions include mortgage and other debt, administration expenses of the estate, and losses during estate administration.
The Economic Growth and Tax Relief Reconciliation Act of 2001 gradually increased the federal estate tax exemption, until finally repealing the federal estate tax altogether for the 2010 tax year only. The 2010 Tax Relief Act reinstated the federal estate tax with a $5 million exemption through December 31, 2012.
Unless Congress acts to amend or extend this latest tax law, the estate tax will revert to pre-2001 tax law rates, with a $1 million exemption and a top tax rate of 55%.
Check with your tax advisor to be sure that your estate is protected as much as possible from estate taxes upon your death.
* Executors for estates of decedents who died in 2010 have the option of electing to use the 35 percent rate, $5 million exemption, and "stepped up" basis of inherited assets for income tax purposes or zero estate tax liability with "carry over" basis of inherited assets for income tax purposes.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from a Naperville CPA.
Really nice and informative article..Sales Tax Audit Defense Reverse sales tax preparation Refund Services for sales & use tax, filing compliance, nexus, refund, audit defense and other sales and use tax questions.
ReplyDelete