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Frequently Asked Questions (FAQs)

Taxes

What are estate taxes?

Estate taxes are charged by the federal (and sometimes the state) government when the net value of a decedent’s assets at his or her death exceeds the federal estate tax exemption equivalent.  For a decedent who dies in 2011 or 2012, the equivalent is $5 million, that is, if the net value of what the decedent owned exceeds $5 million, the difference is taxable If the gross estate exceeds $5 million, a return is required but if there are sufficient deductions, such as an outstanding mortgage, which bring the taxable estate to less than $5 million, no tax will be due.

The federal estate tax exemption equivalent for a decedent who dies in 2013 or thereafter has not yet been fixed.

All assets that pass to a surviving spouse are not taxed by reason of the unlimited marital deduction.  However, if this leaves the surviving spouse in a position where it is likely there will be an estate tax on his or her death, the surviving spouse may wish to consider disclaiming, that is, refusing to inherit all or a part of the deceased spouse’s interest in assets.  How those assets are then distributed will depend on the will or trust of the decedent.