Estate Tax
Definition of "Estate tax"
Wondering what is an estate tax? While the name makes it seem like a variation to regular “property tax”, the correct estate tax definition is pretty different.
An estate tax is a federal tax imposed on the estate of a decedent according to the value of that estate upon the death of the taxpayer/homeowner via a will or according to state intestate laws. In other words: a tax the government collects from the transfer of real estate as an inheritance.
Note: estate tax does not apply to surviving spouses; only when the beneficiary is an heir. Plus, the tax is paid by the estate, not the heirs.
The first step in the computation of the federal estate tax owed is to determine the value of the decedent's gross estate. This determination can be made by adding the following values of assets owned by the decedent at the time of death:
- property owned outright.
- gratuitous lifetime transfers, but with the stipulation that the decedent retained the income or control over the income.
- gratuitous lifetime transfers subject to the recipient's surviving the decedent.
- gratuitous lifetime transfers subject to the decedent's retaining the right to revoke, amend, or alter the gift.
- annuities purchased by the decedent that is payable for the lifetime of the named survivor as well as the annuitant.
- property jointly held in such a manner that another party receives the decedent's interest in that property at the decedent's death because of that party's survivorship.
- life insurance in which the decedent retained incidents of ownership.
- life insurance that was payable to the decedent's estate.
The second step in the computation of the federal estate tax owed is to subtract allowable deductions (including bequests to charities, bequests to the surviving spouse, funeral expenses, and other administration expenses) from the gross estate. This results in the tax estate. Adjustable taxable gifts are then added to the tax estate, resulting in the computational tax base.
When buying a home, think about the future. Ask your real estate agent to recommend a tax specialist so you’re not caught off guard regarding any taxable assets.
Popular Real Estate Terms
As a hopeful house hunter, renter, or seasoned real estate investor, you've probably come across baffling terms. One such term is "adhesion contract." It might sound complex, but don't ...
(1) Methods that involve discounting the future cash flows generated by an income property. These techniques are used primarily for valuation. (2) Methods of selecting and ranking ...
A recorded plat defines a subdivision map that you have to file in the county recorder’s office. It will show the location and boundaries of your parcels of land. Knowing this, we can ...
(1) Judgment against a defendant who does not respond to the plaintiffs lawsuit or fails to appear in court at the hearing or trial date. (2) Judgment issued by the court against the ...
Characteristic of a trust that prevents the invasion of its principal by the trustees while providing a lifetime income to its principal beneficiary with the rest going to the son's ...
Legal lien on property on behalf of an individual who has not been paid for material furnished in constructing property. The material enhanced the value of the property, and as such the ...
Homes with division of ownership or use of a resort unit on the basis of time periods. For example, a resort home may be divided into 25 time shares of two weeks each, with two weeks left ...
A reassessment or a reappraising is a decision or strategy made by the owner or the state or local authorities. The reassessment definition is a revision of an earlier assessment. Property ...
Underground pit or tank used to store sewage. ...
Have a question or comment?
We're here to help.