Estate Pays $900,000 in Estate Tax That Could Easily Have Been Avoided
How Does The Estate Tax Work? After your death, if your estate if worth $2 million or more (this limit is scheduled to go up to $3.5 million in 2009) then the executor of your estate must file an estate tax return. The estate tax return will list the value of all your assets such as real estate, investments, retirement accounts and personal property. If all $2 million of assets pass to your spouse, although an estate tax return still must be filed, no estate tax is due at that time, no matter how large the size of your estate. This is called the spousal exemption. This exemption only applies if your spouse is a U.S. citizen. Upon the death of the surviving spouse, estate taxes will be calculated and due when the estate tax return is filed. When determining if your estate owes taxes, first a calculation is done which assumes your entire estate is subject to tax. Next, a credit, called the unified credit, is applied.
