In the United States, the federal government along with a few state governments assesses and regulates the condition on estate tax. In its most basic terms, estate tax is a kind of tax levied on estates whose total value exceeds a certain limit set by said government agencies. The exclusionary limit or threshold differs among states. But whatever the limit, it has to be paid by those whose estate crosses that limit. In the State of New York, estates more than $5.85 million in value will be subject to estate taxes. When an estate owner passes away, the levy is calculated based on the current fair market value and not the value at which the asset was acquired.
Estate taxes are not imposed on estates that a person passes on to a surviving spouse. However, the collective estate will be subject to taxes if the value exceeds the limits at the time of the surviving spouse’s death.
Federal Estate Taxes are regulated by the IRS or Internal Revenue Service. Currently, the requirements suggest that people with estates and prior taxable gifts that exceed $11.4 million file and pay estate taxes as required. With an estate planning lawyer’s help, the beneficiaries and estate holders can find ways to avoid being levied high estate taxes.
State Estate Taxes are a part of estate taxes as a whole. If an estate doesn’t meet the limit of federal estate taxes, it may still be applicable to pay estate taxes by the state. The exemptions of state taxes are less than the federal estate tax. For example, estates less than $1 million in value are not taxed.
In the case of an estate owner’s estate exceeds the tax limit, the trustee or executor will file the tax return for both state and federal taxes. The payments and returns are due within nine months after the testator’s passing.
Understanding estate taxes can be complex. In this section, you’ll find articles that delve a little deeper into the subject and explain the concept further.