In general, what are Estate Taxes and how do they work?
- On June 7, 2001, President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001, which made significant changes to Federal estate, gift and generation-skipping transfer taxes.
- Generally, the government assesses estate taxes when the gross value of your estate exceeds the applicable federal exclusion during the year of your death. Currently, the following exclusion amounts apply:
Year Decedent Dies |
Applicable Exclusion |
2006, 2007 and 2008 |
$2.0 M |
2009 |
$3.5 M |
2010 |
$0. Sunsets. |
2011 |
$1.0 M |
This means that if your gross estate is less than the applicable exclusion amount during the year of your death, your estate will pass to your heirs estate tax-free. If your estate exceeds this amount, your estate will pay significant estate taxes prior to distribution to your heirs.
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