levy paid to the federal government or state on a deceased person's assets that have been left to heirs. The estate pays the tax, not the recipients. There is a $1,000,000 federal exclusion on property transfer if the individual dies. No estate tax exists for property going from one spouse to another.
amount due to the government, generally based on the fair market value of one's property at death, less liabilities. The federal estate tax and gift tax have been unified, and one unified credit amount applies to the sum of the property given during one's lifetime and remaining at death. Estate tax exemptions and deductions are numerous, and relevant tax laws can be complex.
tax imposed by a state or federal government on assets left to heirs. Under the Economic Recovery Tax Act of 1981, there is no estate tax on transfers of property between spouses, an action known as the marital deduction. According to the Economic Growth and Tax Relief Reconciliation Act of 2001, the amount of assets that each person can exclude from federal taxes is $2 million in 2006, rising to $3.5 million in 2009. In 2010, the estate tax is completely repealed, and in 2011 the estate tax law returns using 2001 rules, except that the exemption goes to $1 million. Any assets passed to beneficiaries over these limits that are not protected by trusts are assessed estate taxes of 46% in 2006, falling to 45% in 2007 and thereafter. Many states impose their own estate taxes on top of federal levies. Careful estate planning, involving the writing of a will and the establishment of trusts, is essential for those wishing to minimize estate taxes. Also called death tax; inheritance tax.
a tax based on the value of property left by the deceased. The market value of an estate is subject to taxation as of the date of death or, if lower, six months later. There is an exemption, which rises in steps as shown in Table 22.
Example: Abel dies in 2003, leaving $1,250,000 worth of net assets. The estate of Abel will pay an estate tax on $250,000. Abel's heirs may also be liable for an inheritance tax under their state law.
