Will you have to pay the estate tax?

On Behalf of | Oct 6, 2017 | Estate Planning, Firm News |

Ask anyone in Hernando County what inevitabilities there are in life, and you will likely get the same two answers every time: Death and taxes. Sadly, those two things are often linked. You work your entire life in order to accumulate assets that you one day hope to pass on to your surviving spouse and/or children. Imagine having to dedicate a significant portion of those assets to paying a hefty tax bill. Having to do so may result in there being much less than you were anticipating being able to leave to your beneficiaries. 

Fortunately, not all estates are subject to the estate tax. You are only required to pay the tax if the total value of your estate exceeds the threshold established by the federal government (which, according to Forbes Magazine, is $5.49 million for 2017). Thus, if your estate is below that, the tax exemption means you can pass your assets on tax-free. 

Yet even if the total value of your estate exceeds that amount, there still may be a way to avoid the tax. First and foremost, your unlimited marital deduction allows you to pass any amount of assets you want on to your spouse without being taxed. Your spouse is also able to take the unused portion of your estate tax exemption and apply it to his or her own. Thus, in reality, your estate can be valued at up to $10.98 million without being taxed. This benefit is not automatic, however. Your surviving spouse must still file an estate tax return for the year that you die, and elect estate tax portability on that return. Otherwise, your leaving assets to her could push the value of her estate above the tax threshold, causing it to be taxed at close to 40 percent of the amount above the exemption.