The Estate Tax Calculator is a kind of calculator that is used for the evaluation of federal estate (inheritance) tax for the residences in the United States based on assets and liabilities. This estate tax calculator makes use of the exemption and tax rate based on the United States of America’s “2010 Tax Act” that was signed into law by President Obama on December 17th, 2010.
Apart from the USA, many states also compel their citizens to pay an estate tax, with the state version called either an estate tax or an inheritance tax. In most situations, the state estate taxes are much smaller in amount compared with the federal tax.
What is Estate Tax?
When a person passes on, the properties and funds that belong to that person are transferred to the heirs. Worth mentioning is that property may be taxed by the government, and that kind of tax is called the Estate Tax (the property left to us by our loved ones is called an ‘Estate’). In the US, the estate tax is part of the Unified Gift and Estate Tax system. Another part of the system, the gift tax, enforces a tax on transfers of property during a person’s life; the gift tax prevents avoidance of the estate tax in the event that a person wants to give away his/her estate before death.
Avoiding the Estate Tax
The US has a basic exclusion from the Federal Estate tax, which was pegged at $5.43 million per person for 2015. Once above the exclusion, estates are taxed at 40 percent. Nevertheless, mainly people who even have funds above that amount don’t wind up paying any estate tax at all according to the Urban-Brookings Tax Policy Center.
Apart from just avoiding Estate Taxes, good estate planning can help to ensure the smooth transition of wealth transfer from one generation to another. Such a plan ensures that family financial goals are met.
Inheritance can cause tension within a family such friction can be done away with by setting up an estate plan and having the whole family agree to it.
The first step is to take a record of all the assets a family owns and don’t ever neglect small things. The reason being that a little work of art, or a piece of jewellery can have great sentimental value, even if it isn’t worth a lot of money. It’s important to keep away from having disputes arise over any piece of property.
It is also significant to draw up the right documents; namely a will, which shows to whom each asset is left, an assignment of power of attorney, so that one person may handle major issues, and a living will or health-care proxy (medical power of attorney), so that medical decisions can be made for those who are no longer able to make them. It’s important to go over these with a lawyer as they must be mindful of both federal and state laws governing estates.
If there are sufficient assets to be distributed, the use of trusts is often recommended. Trusts are independent organizations that are managed to distribute the family’s assets. They allow preconditions on how and when assets will be distributed. They protect heirs from creditors and offer significant tax protection.