The Federal Estate Tax by David Joulfaian: 9780262551113 | PenguinRandomHouse.com: Books (2024)

FAQs

What is the US estate tax summary? ›

The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 PDF).

How The Wealthy Save On Estate Taxes. If you are worth hundreds of millions or billions, your estate will far surpass the estate tax exemption amount. As a result, you need to set up a GRAT. You, the grantor, transfer assets to a trust (GRAT) and retain the right to receive an annuity payment for a term of years.

Also known as the "death tax," the federal estate tax is a tax that's levied on a dead person's inherited assets. The estate tax ranges from rates of 18% to 40% and generally only applies to assets over $13.61 million in 2024. Thirteen states levy an estate tax.

First, we total up everything you have the power to give away on your death. Next, we apply any deductions and then subtract the exemption amount to find your taxable estate. Next, we apply the tax credit. After all of these calculations, we can then determine how much is owed in Estate Taxes.

Certain types of trusts can help avoid estate taxes. An irrevocable trust transfers asset ownership from the original owner to the trust beneficiaries. Because those assets don't legally belong to the person who set up the trust, they aren't subject to estate or inheritance taxes when that person passes away.

This threshold gradually rises every year to account for inflation over time. As of 2023, your estate is required to pay the federal estate tax if the value of your taxable estate exceeds $12.92 million and increases to $13,610,000 for 2024.

(IV) Arguments Against Inheritance Tax

(1) One of the main arguments against an inheritance tax is that it, and the estate tax, essentially serves as double taxation on a deceased person's wealth. (2) An inheritance tax disproportionately burdens small businesses.

One type of trust that helps protect assets is an intentionally defective grantor trust (IDGT). Any assets or funds put into an IDGT aren't taxable to the grantor (owner) for gift, estate, generation-skipping transfer tax, or trust purposes.

It is scheduled to expire, or “sunset,” on December 31, 2025, unless Congress acts to extend it or make it permanent. If no action is taken, the exemption amount will revert to its pre-TCJA level of $5.6 million per individual, adjusted for inflation from 2017.

Estate taxes and inheritance taxes are often discussed together, but they are different: Inheritance tax is paid by a beneficiary, while estate tax is paid out of the deceased's estate before any remaining money, property or other assets are distributed.

Who bears the burden of an estate tax? ›

Most estimates assume the decedent bears the estate tax, primarily because of data limitations. There is good reason to believe that heirs most often bear the tax in the form of lower inheritances. When the burdens are analyzed this way, individuals inheriting over $1 million are likely to bear most of the estate tax.

When someone transfers property or assets to another person within three years of their death and they do so at less than fair market value then those properties or assets will be considered as part of the gross estate and an estate tax is levied against them.

Federal tax laws do not consider most inherited assets to be taxable income.

An estate tax is levied on the estate of the deceased while an inheritance tax is levied on the heirs of the deceased. Only 17 states and the District of Columbia currently levy an estate or inheritance tax.

2024 Federal Estate and Gift Tax Amounts

Federal Exemption Amount. The amount which can pass free of federal estate, gift and generation-skipping taxes (“the federal basic exclusion amount”) has increased in 2024 from $12.92 million to $13.61 million per person.

Currently, assets worth $13.61 million or more per individual are subject to federal estate tax. Some states also levy estate taxes. The federal estate tax exemption amount is scheduled to sunset at the end of 2025.

Only estates with gross assets and prior taxable gifts exceeding the annually determined exemption amount are required to file this form. For 2023, this threshold is set at $12.92 million, or $13.61 million in 2024.