From identifying the most beneficial type of estate plan to discussing inheritance with your loved ones and deciding who to place in charge of your estate, you could have many different topics to focus on when it comes to estate planning. In addition, if you have significant assets it is crucial to determine whether your estate will become subject to federal estate taxes and prepare accordingly.
Although many estates do not face taxes at the federal level, you should go over the filing threshold and understand how the government calculates a gross estate.
Federal estate taxes and your gross estate
The Internal Revenue Service states that a federal estate tax return becomes necessary if the gross estate exceeds the filing threshold. When calculating the gross estate, the fair market value of assets applies (as opposed to what you paid for them upon acquisition). Examples of assets that count toward your gross estate include real estate, trusts, cash and securities, business interests and insurance.
Certain deductions could affect your taxable estate, such as property you pass on to a charity, your mortgage and expenses related to estate administration.
The filing threshold for federal estate taxes
The filing threshold for federal estate taxes in 2023 is $12,920,000. Therefore, a federal estate tax return becomes necessary for those who die in 2023 if their gross estate exceeds this amount (after taking deductions into consideration). You should note that the filing threshold changes on an annual basis.
If you anticipate that taxes will apply to your estate, make sure you analyze your options carefully.
