Taxes After Death

Post By: Dana Sunderlin

A major part of estate planning is taking into account the taxes that will need to be paid off after your death. When you die, the person in your will identified as the “executor” of your estate, will be responsible for all of these taxes. If you do not name someone as the executor of your estate in your will, then a probate court will appoint who will be in charge of these things, which will generally be a spouse or other family member.

The most significant tax that is placed on a person’s estate is the federal estate tax. This generally ranges from 41% to 49%, depending on the size of your estate and other factors. Although this tax is the most significant, it is important to note that when a person dies, they have a one-time exclusion of $2 million from estate taxes. It is also important to know that the IRS grants a surviving spouse to receive an unlimited amount of property, free from federal estate taxes. This only happens of the spouse is a U.S. citizen, and the estate is fully taxed after the spouse’s death.

In addition to the federal estate taxes, there are also state taxes, which have also been called “estate, inheritance, or succession taxes.” Although state taxes are relevant, only about 12 states in the United States currently enforce them. These taxes vary throughout those states and are much less than the federal estate taxes. Another form of tax that may need to be paid is a death duty. This tax only applies to someone who owns property in a foreign country, or owns stock in a foreign corporation.

Sources:

http://www.smartmoney.com/personal-finance/taxes/closing-down-the-estate-13279/

http://www.newyorklife.com/cda/0,3254,11402,00.html

http://www.usatoday.com/money/perfi/basics/2007-08-23-inheritance-tips_N.htm