Federal estate taxes are transfer taxes due when the assets of a deceased person pass to another person or entity. If you’re like most people, you’ve heard estate taxes referred to as the death tax and you know that there’s a new estate tax law, but you don’t know what the new tax law means to you. Will you have to pay any estate taxes?
The new estate tax provisions of the Tax Relief, Unemployment Insurance Act became law on December 17, 2010. Everyone is affected by the new estate tax law, but that doesn’t mean that you’ll have to pay estate taxes.
Actually, in 2011 and 2012, very few people will have to pay estate taxes because each individual gets a free pass (or an exclusion) on the first $5,000,000 transferred to another person. The amount is $10,000,000 for a married couple.
If you are in charge of the estate of someone who died in 2010, consult with a qualified estate planning attorney before filing estate tax returns and settling the estate. There are important tax decisions that must be made with the guidance of a professional.
The true challenge awaits us all in 2013 and beyond. The new estate tax law sunsets, the exclusion amount reverts back to only $1,000,000, and that amount is not doubled for a married couple without sophisticated estate planning. With the exclusion on the estate tax set at $1,000,000, a lot of people will be paying estate taxes if they don’t have good estate planning that takes into account the changing rules.
For most people, estate taxes are a voluntary tax. Only those who don’t plan pay them. Consult with an estate planning attorney to see how you and your estate will be affected by estate taxes.