For 2013, the exemption amount is 5 million dollars per person with a top federal estate tax rate of 40 percent. The federal estate tax rates for 2013 were established by The American Taxpayer Relief Act of 2012. For 2017 and 2018 estate tax rates and exemption amounts, see estate taxes.
Many Americans were pleased with the outcome of the 2012 fiscal cliff deal that resulted in these estate tax rates. Without this legislation, estate tax rates would have been much higher. However, while the current 5 million dollar exemption amount is substantial, an estate tax rate of 40 percent will cause many small business owners to forfeit a significant amount of the wealth they worked hard to create for their families. It also threatens to destroy wealth for many fiscally conservative families that sacrificed to pass some measure of financial security to future generations.
If you believe your estate may be impacted by estate taxes, there are options to consider. You may be able to benefit from some of the estate planning strategies designed to minimize estate taxes. An estate planning attorney may recommend you establish one or more estate planning trusts as part of a tax planning strategy. For an overview of estate planning trusts, see more about trusts.For an overview of estate and inheritance taxes, information on how to reduce your estate tax, and recommended estate tax guides, see estate tax info.
Don't Overlook Other Inheritance Taxes
When considering taxes that may impact the amount of inheritance received by heirs and beneficiaries, people often tend to focus solely on federal estate taxes. Nevertheless, there are other important tax considerations when planning your estate.
States vary widely in the amount of taxes they assess on a deceased person's estate and any inheritances left to heirs and beneficiaries. For information on applicable tax laws in your state, see inheritance taxes.
You May Be Exempt From Estate Tax
Despite how the estate tax is portrayed in the news, it is not a legitimate concern for the majority of Americans. The current exemption amount actually allows a fairly sizeable amount of assets to pass to your heirs or beneficiaries tax free.
If you are concerned about the government taking part of your estate for estate taxes, consult a professional before spending money on complex estate planning methods to avoid the tax. A tax professional or financial planner can advise whether estate taxes are likely to apply.
This page was updated March 18, 2015.
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