J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

39.7 What is the Estate Tax?

The estate you built up may not be entirely yours to give away. The federal government and, in most cases, at least one state government stand ready to claim their shares.

The federal estate tax is a tax on the act of transferring property at death. It is not a tax on the right of the beneficiary to receive the property; the estate and the estate alone pays the tax, although the property passing to individual beneficiaries may be diminished by the tax.

Understand what the word estate means in estate tax law so that you do not underestimate the value of your taxable estate. The estate includes not only your real estate (foreign and domestic), bank deposits, securities, and personal property such as art objects, but can also include insurance, your interest in trusts or jointly held property, and certain interests you have in other estates.

The rest of this chapter will alert you to some basic steps you can take to start planning for your estate. You will need to consult with an experienced estate tax planning professional, who can explain the potential extent of estate tax costs and help you develop a plan for estate tax savings if you have substantial assets that could be subject to the estate tax in the future.

You will need to stay informed of developments in Congress. Congress has been unable to agree on a “permanent” set of rules for estate and gift taxation, thereby creating uncertainty for long-term planning. Rules that applied for 2011 and 2012 ...