How to Determine if You Need to Worry About Estate Taxes

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14 Sep How to Determine if You Need to Worry About Estate Taxes

Here is a simplified way to project your estate tax exposure; take the value of your estate, net of any debts. Also, subtract any assets that will pass to charity on your death.

Then, if you are married and your spouse is a U.S. citizen, subtract any assets you will pass to him or her. Those assets qualify for the marital deduction and avoid potential estate tax exposure until the surviving spouse dies. The net number represents your taxable estate.

You can transfer up to your available exemption amount at death free of federal estate taxes. So, if your taxable estate is equal to or less than the estate tax exemption (for 2015, $5.43 million) reduced by any gift tax exemption you used during your life, no federal estate tax will be due when you die. However, if your taxable estate exceeds this amount, it will be subject to estate tax. Many states, however, now impose estate tax at a lower threshold than the federal government does, so you also will need to consider the rules in your state.

If you are not sure whether you are at risk for the estate tax or if you would like to learn about gift and estate planning strategies to reduce your potential liability, please contact us.

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