About Federal Estate Tax

Federal Estate tax was re-enacted in December of 2010 after initially being repealed in January of that year. It is the tax collected when a person’s assets are transferred to the heirs after a death. It is applied on fair market value of the property.

State Inheritance Tax and Federal Estate Tax

Two states collect both state inheritance tax along with the estate tax. These are Maryland and New Jersey. State inheritance tax is assessed on who gets the property and not on the value of the property. Seven states collect it.

Federal Estate Tax Subjects

All United States citizens are subjected to the federal estate tax but not all have to pay the tax. The IRS, or Internal Revenue Service, has a voucher of sorts that is given to all people to be applied against this estate tax bill. The value of the estate has to be under this “credit” for it to be free of estate taxes. “Net estate value” is the gross estate less than estate tax credits and estate tax deductions.

Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act 2010

This put a provisional “voucher” as described above at five million dollars. It also created 35 percent estate tax rate until December 31, 2012. After that date the law reverts back to the tax law that was in effect in the years 2001/2002. This five million dollar voucher will go back down to one million and the 35 percent estate tax rate goes to 55 percent on January 1, 2013.