What is Estate Tax?

Posted on: April 9th, 2010 by

Estate Planning - CPAThe estate tax has been an important source of federal revenue for nearly a century.  Many people, however, do not fully understand what the estate tax is.  The estate tax is a tax imposed on the transfer of the “taxable estate” of a deceased person, whether it be property, life insurance benefits, or financial sums, to a beneficiary. First, a “gross estate” value must be determined to include the value of all assets of the deceased person at time of death.  From there, you can speak to a CPA about all your possible deductions to try to eliminate as much of the estate tax as you can.  Of these possible deductions, the most important is the deduction for property passing to the surviving spouse because it can eliminate any federal estate tax for a married decedent.

Another thing to keep in mind is that many US states also impose their own estate or inheritance taxes.  Some states “piggyback” on the federal estate tax law, however, some operate independently of federal law, making it possible for an estate to be subject to state tax, while exempt from federal tax.  You can speak to your local CPA to find out which states impose their own taxes.



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