Estate taxes are a tax on a person’s right to transfer (large) assets upon their death. The estate tax is part of the Federal Unified Gift and Estate Tax system. Estate taxes are imposed on the assets or “estate” of a deceased individual, and taxes are owed by the estate. The gift tax imposes a tax on large gifts made during a person’s life; it essentially prevents avoidance of estate tax by a person giving away their estate during their life.
Many States, including California, impose an additional estate tax. In contract, “inheritance taxes” are taxes owed/paid by the recipient heir, rather than by the estate.
However, if an estate (or part of it) is left to a spouse or charitable organization, the estate tax may not apply.
As of this writing (2007), the Federal estate tax system is uncertain. For 2007 and 2008, each individual can gift (either during their life or upon death) up to $2,000,000 before being taxed. In 2009, that amount is increased to $3,500,000 per person; and in 2010, estate tax is abolished… but only for one year. If the estate tax system is not modified or confirmed by Congress and the President, in 2011 the current estate tax system is revived, but with a smaller, $1,000,000 personal exemption.
Good estate planning often can minimize the amount of estate taxes that may be owed upon death.
If you have a question about your legal rights, or wish to speak to an attorney about your situation, please call us today at 510-663-9240, or contact us online to discuss your legal rights.