Understanding Estate Taxes: Who Has to Pay Estate Taxes?

Who has to pay estate taxes?

Depending on how much you own when you die, your estate may have to pay estate taxes before your assets can be fully distributed. Estate taxes are different from, and in addition to, probate expenses (which can be avoided with a revocable living trust) and final income taxes (on income you receive in the year you die). Some states also have their own death/inheritance taxes.

Federal estate taxes are expensive – the rate is 46% in 2006, 45% in 2007 and 2008 – and they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. But estate taxes can be substantially reduced or even eliminated – if you plan ahead.

Your estate will have to pay estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time.

Here is the current schedule:

Year of Death                    “Exemption” Amount

2006, 2007 & 2008        $2 million

2009                                     $3.5 million

2010                                     N/A (repealed)

2011 and thereafter         $1 million

For additional questions about estate tax law, speak with our experienced Estate Lawyer in Los Angeles today.

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