|
|
Estate Tax Information
What Is Estate Tax?
Inheritance tax, also known in some countries outside the
United States as a death duty and referred to as an estate tax within the US, is
a form of tax levied upon the bequest that a person may make in their will to a
living person or organization. If a bequest is made to a charitable
organization, most countries do not apply the tax. The tax is also imposed on
other transfers of property made as an incident of the death of the owner, such
as a transfer of property from an intestate estate, or the payment of certain
life insurance benefits.
The U.S. federal government imposes an estate tax, calculated as a percentage of
the part of the estate that exceeds the current exempted value. For 2005, an
estate with a value less than $1,500,000 would not pay an estate tax and most
likely would not have to file an estate tax return. Many U.S. states also impose
their own estate or inheritance taxes (See state estate tax).
For estates larger than the current exempted amount, any estate tax due is paid
by the executor or other person responsible for administering the estate. That
person is also responsible for filing a return with the Internal Revenue
Service. The return must contain detailed information as to the valuations of
the estate assets and the exemptions claimed, to ensure that the correct amount
of tax is paid.
Life insurance benefits generally form part of the gross estate for tax
purposes, if the benefits are payable to the estate, or if the decedent was the
owner of the life insurance policy or had any "incidents of ownership" over the
life insurance policy. Similarly, bank accounts or other financial instruments
which are "payable on death" or "transfer on death" are usually included in the
taxable estate, even though such assets are not subject to the probate process.
The taxable portion of an estate can be reduced through charitable contributions
or provisions that allow executors of some qualifying family-owned farms to
reduce the taxable value of an estate's real property by some percentage of
market value (up to certain limits) if certain eligible heirs continue to
actively farm the property for over a decade.
Many of its opponents refer to the estate tax as the "death tax" and have called
for its abolition. Since 2002, the top rate has dropped from 50% by one percent
per year; it is scheduled to drop to 45% in 2009, thence to 0% in 2010, but as
of 2005, if no further changes in the law are enacted, the tax will be
reemployed at a top rate of 50% in 2011. It is, however, expected that Congress
will enact legislation to change this in the intervening period.
For more free legal information on Estate Planning Laws, please use the
links below:
|
