The saying goes that there is no escaping death or taxes. It hardly seems fair, but an ordinary tax return must be filed for the last taxable year of a person’s life. Estate tax is different. Estate taxes are high but there is an excluded amount that changes year by year that can pass free of tax. For U.S. citizens in 2014, the excluded amount is $5.34 million dollars in value, with an estate tax of 40% on assets over that amount.
Estate taxes apply to the total fair market value of the deceased’s estate, including houses, life insurance, bank and stock accounts, savings bonds, IRAs, jewelry and other personal effects, and other assets on the date of death. Final medical bills, funeral expenses, administration costs, gifts to charity, and attorney's fees are usually subtracted from this number to calculate the net taxable estate. Estate tax will generally be due when the net taxable estate exceeds $5,340,000 in 2014 and thereafter adjusted upward for inflation. If an estate is over that threshold, there are still a number of ways of transferring wealth prior to death that may effect taxation.
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