Whether you will be required to pay federal estate tax will depend on the value of your gross estate, minus your debts and liabilities. Estate tax is due on the portion of a net estate that exceeds the federal estate tax exemption amount.
Calculating the Gross Estate
The value of all your assets will be used to calculate your gross estate. These include:
- real estate, including your home
- cars, boats, airplanes
- closely held business interests
- bank accounts, including checking, savings, money market and CDs
- investment accounts such as mutual funds
- stocks and bonds
- money owed to you at the time of your death, such as loans you’ve made, wages and bonuses or commissions
- personal property, such as furniture, clothing, jewelry, antiques, art and books.
- retirement accounts, such as IRAs, 401(k)s, and annuities
- death benefits from life insurance policies
Calculating Your Liabilities
To determine your net estate, you can subtract the following from your gross estate:
- debts and expenses, such as mortgages, lines of credit, personal loans and credit card debt
- expenses associated with the administration of your estate
- certain medical expenses
- funeral expenses
- charitable gifts
- transfers to a spouse who is a citizen of the United States
Your estate will be taxable if the value of your net estate is greater than the available federal tax exemption. The American Taxpayer Relief Act of 2012 sets the estate tax rate at 40 percent for individual estates valued at over $5 million, indexed for inflation.
