The
Estate Tax
Upon
the death of an individual,
Federal estate taxes
are imposed on the
transfer of wealth.
The estate tax is calculated
upon the value of a
decedent's "gross estate". The gross estate can be defined as the value of all property in which the decedent
had any interest at
the time of his death
along with certain
other statutorily mandated
items).
Every
decedent who is a citizen
or resident of the
United States will
have an estate tax
is imposed on his taxable
estate. The amount
determined for the
estate tax due is based
on computation of a
taxable amount which
is then multiplied
by a progressive tax
rate. A Form 706 (Estate
Tax return) must be
filed in every case
within nine months
after the decedent's
death, although an
extension of an additional
six months is generally
granted upon the filing
of an application for
extension.
Gross
Estate Inclusions
The
gross estate’s property
interests are usually
valued at a fair market
value on the date of
death. Some special
rules regarding the
inclusion of property
in a decedent's gross
estate are as follows:
*
Property Owned Outright
This is the simplest
and most apparent category
of items which are
included in the gross
estate. It comprises
property a decedent
owned individually
and outright.
* Jointly-Held Property and the Estate Tax If joint property is held with rights
of survivorship between husband and wife, then one-half of the value of such
joint property is included in the gross estate of the first joint tenant to
die and the other one-half is excluded from the gross estate. If joint property
is held with right of survivorship between people who are not husband and wife,
then the entire value of any joint property will be included in the estate
of the first joint tenant to die, unless the estate can definitely prove that
the surviving joint tenant supplied the money used to purchase the joint property.
* Life Insurance The proceeds of any life insurance on the decedent's life
is included in his gross estate if:
1. the policy proceeds directly or indirectly payable to the decedent's estate;
or
2. the decedent held any incident of ownership in the policy, such as the right
to change the beneficiary, surrender or cancel the policy or borrow against
the policy.
Marital
Deduction Planning
In
a variety of estate
tax deductions, clearly
the most important
is the unlimited marital
deduction providing
an estate tax deduction
for property left to
a surviving spouse.
There are two basics
of the unlimited marital
deduction:
*
An Interest is required
to be passed on to
the Surviving Spouse.
A marital bequest has
to be to a legally
recognized spouse.
A marital deduction
bequest will not be
warranted to a divorced
or deceased spouse.
The surviving spouse
is required to be a
citizen of the United
States.
* The Interest must be a Deductible Property Interest. A deduction is not warranted
from a simple passing of property from a decedent to a surviving spouse. An
interest is deductible only to the extent such interest is included in the
determination of the value of the gross estate. The reason for this rule is
simple; if an item is not included in the gross estate, its passing should
not qualify for a deduction.
If
you would like more
information regarding
asset protection, trusts,
family limited partnerships
or the subject of this
article please call
or email our office.
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