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What is subject to estate taxes?

On Behalf of | Oct 26, 2022 | Estate Planning |

To figure federal estate taxes at the time of your death, the trustee will first need to determine the fair market value of all your assets, which is your gross assets. Then, they will subtract allowable deductions and allowances for gifts made since 1977 to arrive at your net taxable assets. The Internal Revenue Service expects your estate to pay taxes on that amount if it is above $12.06 million for the head of the household. Texas and 37 other states have no state estate tax.

Property

Any property you own at the time of your death, minus the mortgage or loans due on the property, counts as an asset. This includes any real estate and artwork, collections and other items. Your trustee will need to determine its value at the time of your death before heading to probate court as it is that figure they must count, regardless of what you paid for the property.

Stocks and bonds

The trustee also has to do due diligence to determine what stocks and bonds you owned at the time of your death as they count as assets. If you inherited stocks and bonds, only the difference between their value when you inherited them and their current value counts as an asset.

Cash, notes and annuities

Any money in an account with your name on it is an asset to your estate. If they grew in value after your death and before your estate settles, the trustee must obtain a tax identification number and report that income separately.

Life Insurance

Life insurance is generally considered an asset to the person named in the policy. In some cases, you can transfer ownership of the life insurance to someone else at least three years before your death and avoid having it counted as part of your estate.

You can help your trustee by regularly providing them with a list of all your assets.