Determining Estate Taxes

The process of determining estate taxes can be very involved and often includes many different factors.  To determine tax liability for your estate, you must identify “assets” that are taxable by the IRS.  Once you have determined the value of your assets, you will have an easier time determining which estate tax rates will apply.

What Is Included In an Estate?

Estate taxes are based on the value of the estate as a whole.  To calculate property tax of an estate, real property and underlying assets must be included.  Estate assets include:

• real estate, cars, boats, RV’s
• bank accounts, cash, stocks, bonds
• retirement accounts (IRA’s & 401k’s), life insurance polices
• furniture, antiques, jewelry, artwork
• anything of monetary value

Calculating Estate Taxes

To determine estate taxes, take the taxable estate and multiply it by the estate tax for that year.

Estate Tax Calculation Example

For example, an individual who dies in 2010 with $1,350,000 in assets has an estate value of $1,350,000.  For 2010 only, the estate tax has been temporarily repealed and an heir will only have to pay normal income tax on the money inherited.  However, if the person dies in 2011, an estate tax of 55% will apply on all inheritance over $1 million, so the individual would have to pay 55% on the $350,000.  The estate tax in 2011 would be: $350,000 taxable estate x 55% estate tax = $175,000 for 2011 estate tax liability.

Estate Tax Planning Legal Help

To determine the most effective way to handle your estate, it is important to contact an experience estate tax planning attorney who specializes in estate planning.  Understanding the laws associated with estate taxation is an important step to ensuring that you preserve as much of your estate as possible for future generations.