Will my estate be subject to death taxes?
What is my taxable estate?
Q: Will my estate be subject to death taxes?
There are two types of death taxes that you should be concerned about: the federal estate tax and state estate taxes. The federal estate tax is computed as a percentage of your net estate. Your net taxable estate is comprised of all assets you own or control minus certain deductions. Such deductions can be for administrative expenses such as funeral and burial costs as well as charitable donations. The federal estate tax currently taxes estates with assets of $5,000,000 or above (indexed for inflation). However, this law is set to expire in 2013 and the exemption amount may be reduced at that time if Congress does not act.
Even if you believe that that you may not be affected by the federal estate tax, in Pennsylvania there is an inheritance taxes depending on the relationships between the beneficiaries and the decedent. You should regularly review your estate plan with an estate planning attorney to ensure your estate plan takes into account changes in the tax laws as well as shifts in your individual circumstances.
Depending on the assests in the estate, there may also be income tax implications.
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Q: What is my taxable estate?
Your taxable estate comprises of the total value of your assets including your home, other real estate, business interests, your share of joint accounts, retirement accounts, and life insurance policies - minus liabilities and deductions such as funeral expenses paid out of the estate, debts owed by you at the time of death, bequests to charities and value of the assets passed on to your U.S. citizen spouse. The taxes imposed on the taxable portion of the estate are then paid out of the estate itself before distribution to your beneficiaries.
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