An estate tax is a tax on the assets of a deceased person. These assets include most all assets passing to beneficiaries due to death, including assets passing through probate, trust, and life insurance proceeds. Assets passing to a surviving spouse or qualified charity are normally exempt from estate tax.
There is an “exclusion”, also called a “unified credit”, and this amount changes every year. The “exclusion” is the amount that passes to beneficiaries tax free. Every dollar over the exclusion is then subject to estate tax at a rate of approximately 45%. In 2002, a person could pass only $675,000 tax free to his/her beneficiaries. In 2009, that exclusion was raised to $3.5 million. In 2010, there is no estate tax at all. In 2011, the estate tax exclusion will revert to $1 million with a rate of 55% unless Congress acts before the end of the year.
Many trusts can be written in a way to allow for flexibility in estate tax planning. The uncertainty regarding the future of the estate tax makes it especially important to review your existing estate plan and trust today.
See this Wall Street Journal article for more information
