1. What is the federal Estate Tax? (Top)

The federal Estate Tax, colloquially known as the “Death Tax” is imposed on the "taxable estate" of every decedent who is a citizen or resident of the United States. IRC §2001.

So even when you pass away the IRS will still knock on your down.

2. How is my taxable estate calculated? (Top)

The taxable estate is calculated by subtracting allowable deductions from the gross estate. IRC §2051.

The gross estate is broadly defined to include all of the decedent's property, real or personal, tangible or intangible, wherever situated. IRC §2031. So if you think your chateau in the French countryside or mountain cabin in the Swiss Alps is not included in your gross estate, you are sadly mistaken.  

The largest deductions are typically those for mortgages and other debts and, in the case of a married decedent, the federal Estate Tax marital deduction. Deductions are also available for expenses incurred in the administration of the decedent's estate and postmortem administration of the decedent's revocable trust.

For example, when Darryl died, all he owned was a $5 million home with a $2 million mortgage on it and a bank account worth $1 million. Darryl also owned a London flat worth $1 million. Darryl's taxable estate would be $5 million (5-2+1+1).

3. Who has to pay the federal Estate Tax? (Top)

In 2010 there will be no federal Estate Tax, although in 2011 the federal Estate Tax will return with an exemption amount of $1 million.

4. What is the federal Estate Tax rate? (Top)

Currently, there is no federal Estate Tax because the exemption amount is infinity, although the rate is set to increase to 55% in 2011. IRC §2001.

5. Does California have an Estate Tax? (Top)

No, California does not have a state Estate Tax.

Although given California’s chronic budget problems it is not out of the question that a California Estate Tax could be re-instituted.

6. How do I plan for federal Estate Taxes? (Top)

In very simplistic terms, if you are a U.S. citizen and married, there are a number of trusts that can cushion the impact of federal Estate Taxes.

7. I have more federal Estate Tax questions how can they be answered? (Top)

Please call my office at (408) 866-8382 or email me at s.miri(at)mirilaw.com