Estate Taxes: Current Laws in America

When a loved one passes away, the last thing we want to worry about is estate taxes. However, in some cases, you really can't get around them. Many people never think of estate taxes, and in that case, fail to plan for them as well. Sometimes, the estate taxes can really add up and you don't want to be stuck paying something that you did not fully understand. Let's examine the basics of estate taxes work. 

The Basics

Estate tax is a tax that is charged when assets are transferred upon the death of the owner. Regardless of how the property is transferred, an estate tax is figured. This falls under the Unified Gift and Estate Taxes system. There are many factors that determine exactly how much you will have to pay in estate taxes. 

Exemptions

While estate taxes have to be accounted for, only a small percentage of the population has to actually pay them. An estate tax exemption applies on most of the taxable assets. For example, if you are leaving something to a spouse or a charity, the taxes will not apply.

Also, if your entire estate is less than $3,500,000 then you will also not have to pay tax. Therefore, unless you are in the richest 2% of the country, you will not have to pay estate taxes. This eliminates a good portion of the population. This tax was basically designed to keep an upper class royalty from forming in the country as the wealthy just pass everything on to the younger generation.

The Process

Even though you may not have to pay anything out, all of this still has to be accounted for. You will have to add up the entire estate of the deceased person. This include their primary home, any other real estate, stocks, bonds, mutual funds, cash and anything else that they own. For personal property, everything is assessed based on the current market value of the asset. You do not have to figure out how much they originally paid for something. You only go by what you could sell it for in today's market. Therefore, if the deceased had a car, you would go look up the value in Kellye Blue Book and see what it is worth, that is the amount that would be added to the estate. 

All of these calculations can become tedious. Therefore, it is best to have a trained estate attorney or accountant do all of this for you. They have a lot of experience in this field and can get through it all much faster than you could ever hope. This way, you will be sure not to miss anything in the process. Even if someone else does it for you, getting together all of your records could still be a challenge. Once you have everything together, drop it off at your tax professional and let them take it from there.

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