Estate taxes: What you need to know about your estate taxes

No one wants to think about dying and leaving his or her loved ones with a tax burden. Because of that, many people work out their estate taxes early on and include information on how to deal with those taxes after their death in their wills or other documents. By figuring out how much you could owe, you can make sure your loved ones have the money needed to pay taxes if they're owed on your property or assets.

When you pass away, one of the things that will need to occur in many cases is the payment of an estate tax. An estate tax is based on the fair market value of the items in your possession at that time. You calculate in deductions and other values to come to a "taxable estate," which is the amount of assets that can be fairly taxed by the government.

Will you have to pay an estate tax?

It depends on your property. If your property has combined gross assets and taxable gifts of $5,450,000 or more in 2016, then you will definitely have to work out an estate tax. If you have a simple estate that has assets like cash, easily valued assets or publicly traded securities, then you can usually get away without having to pay an estate tax at all.

Can any of a deceased person's unused exemptions be passed on?

Yes. In fact, as of 2011, any leftover exemptions can be passed on to the surviving spouse. To elect to do this, it must be filed on the estate tax return for the decedent.

Source: IRS.gov, "Estate Tax," accessed May 20, 2016

Categories: Estate Tax