The Estate Tax is a tax on your
right to transfer property at your
death. It consists of an accounting of
everything you own or have certain
interests in at the date of death (Refer
to IRS Form 706). The fair market value
of these items is used, not what their
values were when you acquired them. The
total of all of these items is your
"Gross Estate." The includible property
may consist of cash and securities, real
estate, insurance, trusts, annuities,
business interests and other assets.Estate Tax
The money and property you own when you
die (your estate) may be subject to
federal estate tax if the estate is
worth more than the applicable exclusion
amount.
Gifts that
aren't taxable include tuition, medical
expenses, gifts to your spouse, gifts to
a political organization and charitable
donations.
You could pay lower taxes on appreciated
securities by giving them to your child.
If you gave someone gifts valued more
than $12,000, you must report the total
gift to the IRS and may have to pay tax
on the gifts. If you're Married Filing
Jointly, the tax-free amount doubles to
$24,000. If you or your spouse make a
gift to a third party, the gift can be
considered as made half by you and half
by your spouse (known as gift
splitting).
The person who receives your gift
doesn't have to report it to the IRS or
pay gift or income tax on its value.
Most relatively simple estates (cash,
publicly traded securities, small
amounts of other, easily valued assets,
and no special deductions or elections
or jointly held property) with a total
value under $2 million and a date of
death in 2006 or 2007 do not require the
filing of an estate tax return.
Additionally, the person who receives
your estate generally won't have to pay
an estate tax or an income tax on the
value of the inheritance.
Reduced Tax on Appreciated Securities
If you give your child appreciated
securities (such as stock or mutual fund
shares), the tax bill on the increase in
value is passed on to the child along
with the gift.
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