Estate & gift tax generally is the matter of federal government. It is on the property transfer from one person to second person. It might happen either at the death (the estate taxes) or whilst giver of some property is alive (the gift taxes). This article gives a comprehensive overview of Estate & Gift Tax.
Estate Tax
The estates are necessary to file the federal estate tax return in case a value of "gross" estate, without some deductions, is more than a specific dollar amount (5.49 million dollars in the year 2017). The gross estate contains a value of all properties in which a decedent had the interest on her or his death time. They include items as the jointly owned property, real estate, insurance on the decedent's life, bonds & stocks, notes & cash, and mortgages. In case spouses have property in the joint tenancy, & one suddenly dies. Then, 1 half of joint property value is also included in the gross estate of a deceased spouse.
Exemptions of Estate Tax
Personal Exemption: "Personal estate tax exemptions" allow a specific amount of the estate of some deceased person to just transfer without any estate tax. It has altered over time. It reached the 5.49 million dollars mark in the year 2017. Thus, at any moment Congress might raise or reduce the amount, or altogether repeal the estate tax.
Marital Deductions: The estate of a deceased person could pass the tax-free for a living spouse. It is so until that spouse is an American citizen & the interest of a deceased spouse in his or her estate also passes to living spouse outright (or the property gets transferred directly to that spouse upon decedent’s death).
In order to understand the marital deductions & personal estate tax exemptions may work automatically in practice, assume Bob dies and leaves the estate. It is worth 12 million dollars. Putting aside the community property matters for a moment, suppose that the will states 6.49 million dollars go to the wife, & 6.49 million dollars to daughter Kate.
In such situation, there is no part of 6.49 million dollars that Bob leaves for his wife would be actually subject to estate tax (until his wife is an American citizen & all the property that is included in 6.49 million dollars passes to his wife). Of 6.49 million dollars he leaves to his daughter, however, 1 million dollars would be also subject to estate tax (6.49 million dollars minus 5.49 million dollars which is without any tax under the personal property tax exemptions).
Further deductions: More deductions against a gross estate are administrative expenses, charitable bequests, funeral expenses, other indebtedness, claims against an estate, and certain taxes.
Filing of Estate Tax Returns
The personal representative, executor, or a person in the possession of estate's property should file estate tax returns within 9 months of a decedent's death. And, the estate could apply for the 6-month time extension in order to file. However, the taxes should be given within 9 months of a decedent's death. Also, time for the payment of estate tax might extend in some circumstances.
The State Estate Tax
There are some states that impose the estate taxes. Plus, the state where the decedent was living might impose the estate tax, & states where the real estate and the personal property are located might also impose the estate tax. Law of both states having some connection to property should be actually consulted to assess the tax consequences that are linked to property transfers.
Gift Tax
Gift tax is the tax on a legal transfer of the properties from one to the other person, during giving the person's lifetime. Some gifts also exempt from gift tax that includes:
Questions about Gift and Estate Taxation? Talk to a tax preparer
Gift and Estate taxation exemptions are continuously changing as the new regulations and laws are passed. It is good to talk with the experienced tax preparer who could answer your queries about a gift and estate taxation.
