The Death Tax Series (Part 2 of 3)

We all worry about income tax, but there are other taxes that you need to consider when you’re dealing with an estate or a property that is switching hands either at death or during life. In part 1 we covered the gift tax. In part 2 we will cover the federal estate tax. Part 2: the Federal Estate Tax

Understanding The Federal Estate Tax – Dealing with the loss of a loved one is never easy and the extra burden of now having to manage the estate, its finances and taxes can be quite overwhelming.  The Federal Estate Tax is a tax on your right to transfer property at death.  It is paid by the estate—not the heirs. The rate is a flat 40%. The good news is that unless the estate is worth over $5.45 million and you did not use any of your gift exemption during your lifetime, you don’t owe a cent to the government.

Additionally, for married couples, a surviving spouse may elect to pass any of the deceased spouse’s unused exemption to his or her estate.  This is called portability and may be elected on a timely filed estate tax return.  Therefore, even if you do not believe you will owe taxes on your loved one’s estate, it is still important to consult a CPA to ensure you understand and take advantage of portability.

Stay tuned next week when we will wrap up this 3 part series. In part 1, we will discuss the gift tax. in part 2, we will discuss the federal estate tax. In part 3, we will put it all together and conclude.

In the meantime, feel free to contact us for a free consultation.