The Federal Estate Tax Through 2011
The federal estate tax rates and exemptions are set
by Congress, and the rates and exemption limits have
been changed for the period from 2004 - 2009. The changes
enacted by Congress have resulted in a decrease of the
tax rate and an increase in the maximum allowable exemption.
The 2007-2008 estate tax exemption is $2,000,000, and
is set to expire completely, with no estate taxes whatsoever
being imposed on anyone who dies in the calendar year
2010. On January 1, 2011, however, the federal estate
tax will be reinstated with a $1,000,000 exemption.
The United States Estate Tax is frequently referred to as a
"death tax" since its provisions take effect only
after someone dies. At that time, all the assets owned by the
person are subject to the tax, and the value of the estate is
based on their value at the time of death. All assets held by
the deceased, including real property, bank accounts, vehicles,
stocks and bonds, life
insurance, annuities, employee benefits, and more, are considered
to be taxable assets at the time of death.
Assets that are passed to a surviving
spouse are exempt from the federal estate tax as long as
the person receiving them is a United States citizen. If the
surviving spouse is not a citizen, taxes may still be avoided
by passing the assets to a special type of trust. Estate taxes
may also be reduced or avoided by leaving assets to a qualified
charity, and all liabilities are subtracted from the total of
the estate's assets so only the person's net worth is subject
to the estate tax. This taxable amount of the estate is thus
arrived at by taking the gross total of assets owned by the
person who died and subtracting charitable donations and liabilities. THE MAMOLA LAW FIRM, APC is conveniently located throughout Orange County. For additional information, please contact us at (949) 333-6543.