Most people know that when a person passes away, their estate will need to be distributed. However, they may not be aware that they need to address estate taxes. There is general information available about estate taxes that may be useful and an attorney may be able to help.
When a person passes away, his or her assets become property of their estate. The estate tax is imposed on the transfer of those assets to the beneficiaries of the estate.
Gross and taxable estate
The value of the estate includes an accounting of everything the person owned, but the estate tax looks at the fair market value of the items, not necessarily what was paid for them. The total of all of the items is called the gross estate. The property in the gross estate may include cash, securities, real estate, insurance and other assets.
Once the gross estate has been accounted for, there may be certain deductions that can be applied. These may include mortgages or other debts and estate administration expenses. Once these are deducted, that amount remaining is called the taxable estate.
The representative of the estate will usually file a tax return with this information; however, the tax filing requirements may depend on the year the person passed away and the value of the estate.
When filing, they may need to include a copy of the person’s death certificate, a copy of the person’s will or trust, a copy of any appraisals and other supporting documentation.
Estate taxes can be complicated. An estate planning attorney can provide advice to ensure they are completed correctly.