What is the Estate Tax? Does it apply to me?

What is the Estate Tax? 

The Estate Tax is a federal tax on your right to transfer property at your death.  The estate tax is applied to all property you own or have certain interests in at your death.  The property you own or have an interest in at your death is valued for Estate Tax purposes at its fair market value at your date of death, not your purchase price.  There are certain deductions which reduce the amount of your property subject to the Estate Tax and there are credits against the Estate Tax.

The determination of what property is subject to the Estate Tax, and the application of deductions and credits is the subject of text books, scholarly journals, seminars, and Tax Court and other federal court decisions.  If you have questions about the Estate Tax please call our office.

Will the Estate Tax apply to me?

Most estates are not subject to the Estate Tax. This is because Congress has provided a credit against the Estate Tax for estates under $5,450,000.00 in 2016.  This is called the Unified Credit and applies to both Estate Tax and Gift Tax.  The amount of the Unified Credit is indexed for inflation and changes every year.  If all of the property you own or have an interest in is below this number, you do not have to be concerned about the Estate Tax.  It will not apply to your estate.  However, if you own property that has appreciated in value, you may want to discuss methods of using the Estate Tax provisions to assist your heirs in avoiding capital gains tax on that property after your death.

 

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Hannah St. Peter

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