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How to Complete Schedule M for Estate Form 706
Roll an Estate’s Pension Plan or IRA to the Heirs

Is Your Estate Subject to Federal Estate Tax?

You may be one of the few people whose estate would have to pay federal gift or estate taxes, meaning that some of your “stuff” may end up going to Uncle Sam. How do you know if you’re in that situation?

In 2009, if your estate is worth less than $3,500,000, or if you’re married and plan to leave everything or all but that amount to your spouse, it is exempt from federal estate taxes if you die. The same thing is true if you leave these assets to a qualifying charity. Any amount over that, though, is subject to a 45% estate tax. The year 2010 will see the culmination of the federal government phasing out the estate tax. If you die in 2010, your estate will not be subject to a federal estate tax no matter how much it's worth. Whether the estate tax will reappear in 2011 is still up for Congress to decide.

Husbands and wives can transfer assets to each other during life and at death. You have no limits or taxes on this transfer. For example, if you marry or remarry a person who owns a home in his or her name individually, that home can be re-titled into joint ownership. Your spouse would legally be giving you one half of the value of the home. No gift or estate transfer tax would be due because this transfer is made between a married couple.

If you transfer assets to anyone other than your spouse or if you don’t have a spouse, those transfers are subject not only to estate taxation, but potentially state inheritance taxation as well. To avoid taxes on your estate, you could pass all or enough of your assets to a qualifying charity. If you find yourself in this situation, you have wonderful planning opportunities available to you. Consult with a qualified estate-planning attorney immediately if you don’t have a current estate plan in place.

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Estate-Related Taxes You Need to Know About
How to Prepare to File Tax Returns for a Decedent, Estate, or Trust
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How to Complete Schedule E for Estate Form 706
Charitable Deductions for a Decedent, Estate, or Trust
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