Estate TaxThe Estate Tax and The Importance of Estate Planning

Most people are familiar with federal and state income taxes, property taxes, sales taxes, and perhaps even gift taxes. Another important form of taxation to be familiar with, is referred to as the Estate Tax. In order to understand what an Estate Tax is, it is important to understand what constitutes an Estate.

An estate is generally all of a decedent's (the person who has died and is leaving property) assets, in whatever form (real estate, stocks, bonds, personal property, etc.) that are lumped together and distributed to your heirs (those that are legally entitled to inherit your property) and/or assigns (those you create documentation to leave things to).

It is important to know not only what an estate generally is, but what your estate contains, because the Estate Tax does not apply to estates below a certain threshold. A visit with an Estate Planning Attorney can help you plan on ways to ensure that not only are your intended recipients taken care of, but also that you take full advantage of tools such as gifts during your lifetime, or the creation of a Living Trust to help offset any potential Estate Taxes.

Congress revisits the Estate Tax from time to time, to the extent that in 2010 there was no Estate Tax at all. Subsequently, however, a deal was passed for the following two years, allowing for an "exemption" for up to $5 million per individual. Exemption meaning that the amount under the maximum would not be taxed at all. Anything above the exemption amount will be taxed at a 35% rate.