When Does An Estate Become Subject to the Federal Estate Tax?
Get Legal Help Today
Secured with SHA-256 Encryption
UPDATED: Jul 16, 2021
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
An estate becomes a taxable entity (just like a business or an individual) with the death of an individual and continues to exist until all the assets are disbursed to its heirs. Your personal representative will file tax returns for the estate (Form 706) to show estate assets and an estate income tax return (Form 1041) to report any income generated by the estate.
Before the tax is calculated, your gross estate of money, real property and other assets you had an interest in at the time of death, less the charitable and marital deductions, estate administration expenses, and other allowable deductions are tallied by the IRS to figure your taxable (net) estate. Various credits are subtracted to determine the estate tax due.
The federal tax is payable if the taxable estate exceeds the decedent’s exemption. With the passage of the 2017 Tax Cuts and Jobs Act the basic exemption amount was increased from $5,000,000 to $10,000,000, before the annual cost of living adjustments were taken into account. For a 2019 date of death, the inflation-adjusted exclusion figure is $11.4 million for an individual (a married couple can shield $22.8 million). (However, under the 2017 law, those exemption amounts in 2026 will revert to the 2017 figures: $5.49 million per person, or if married, $11.2 million.)
What assets are included in your gross estate and how much each item is worth is closely scrutinized by the IRS and often is the source of irritating squabbles between the estate and the IRS.