| The Estate Tax is a tax on your right to transfer property at your
death. It consists of an accounting of everything you own or have certain
interests in at the date of death (Refer
to Form 706 (PDF)). The fair market value of these items is used, not
necessarily what you paid for them or what their values were when you
acquired them. The total of all of these items is your "Gross Estate." The
includible property may consist of cash and securities, real estate,
insurance, trusts, annuities, business interests and other assets. Once
you have accounted for the Gross Estate, certain deductions (and in special
circumstances, reductions to value) are allowed in arriving at your "Taxable
Estate." These deductions may include mortgages and other debts, estate
administration expenses, property that passes to surviving spouses and
qualified charities. The value of some operating business interests or farms
may be reduced for estates that qualify.
After the net amount is computed, the value of lifetime taxable gifts
(beginning with gifts made in 1977) is added to this number and the tax is
computed. The tax is then reduced by the available unified credit.
Presently, the amount of this credit reduces the computed tax so that only
total taxable estates and lifetime gifts that exceed $1,000,000 will
actually have to pay tax. In its current form, the estate tax only affects
the wealthiest 2 percent of all Americans.
Most relatively simple estates (cash, publicly traded securities, small
amounts of other easily valued assets, and no special deductions or
elections, or jointly held property) do not require the filing of an estate
tax return. A filing is required for estates with combined gross assets and
prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006
- 2008; and $3,500,000 effective for decedents dying on or after January 1,
2009. |
