You can estimate the estate tax you will owe in advance.
Taxes are a part of life.
Everyone pays them in some way or another.
Very few truly understand them.
This can be especially concerning when taxes are due in a time of grieving.
According to a recent Investopedia article titled “Estate Taxes: How to Calculate Them,” calculating potential taxes could help with planning and alleviating stress.
You should start off knowing a little about the federal estate tax as it applies to all states.
The highest rate of this tax is 40 percent.
Quite a large percentage, yes?
However, federal estate taxes will come into play unless the fair market value of your assets exceeds $11.18 million (that is double for married couples).
The next thing you should do is find out if your state has an estate tax of its own.
If you live in the District of Columbia, Washington, Vermont, Rhode Island, Oregon, New York, Minnesota, Massachusetts, Maryland, Maine, Illinois, Hawaii, Delaware, or Connecticut; then the answer is yes.
What is the estate tax threshold for a state tax?
This will depend on the state.
Nevertheless, while the state estate tax thresholds are uniformly lower than the federal level, so are the tax rates.
Accordingly, depending on where you live, you could pay both federal and state estate taxes.
Remember these are calculated from the current value of your assets rather than their value when you purchased them.
Is all of your property included?
If you leave property to an eligible charitable organization or you spouse, these are exempt.
You will need to calculate your gross estate first though.
After this you will subtract, these assets.
You will also subtract any administrative fees or debts.
You can then add taxable gifts.
This includes those gifts you may have made that exceeded the annual gift exclusion amount (i.e., presently $15,000).
Running these calculations now will help you know what tax urden you could leave your loved ones.
It can also help you plan to minimize these burdens.
Working with an experienced estate planning attorney will help you create a plan to meet your needs by providing for the efficient administration of your estate and protecting more of it from otherwise avoidable taxation.
Reference: Investopedia “Estate Taxes: How to Calculate Them”