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Who/what is the federal estate tax on?

Different estates raise different sorts of estate planning/administration concerns. Some estates raise estate tax issues. When a person dies and their estate is a particularly high-value estate, their estate might trigger the federal estate tax.

When it comes to any tax, among the details it is important to know is who/what the tax is on. An important thing to note about the federal estate tax is that the tax, if it is triggered, is not put on the estate's heirs. Rather, it is put on the estate itself. So, when an estate triggers the federal estate tax, handling matters related to the tax is often among the responsibilities of the personal representative of the estate.

Of course, just because an estate tax isn't directly on an estate's heirs doesn't mean the federal estate tax can't have big impacts on heirs. When an estate is required to pay an estate tax, it generally lowers the total amount of resources in the estate, which can end up significantly affecting inheritance size for the heirs. So, estate tax planning can be an important thing for a person to look into when their finances are such that federal estate tax issues could come up in connection to their estate in the future.

Now, not all estates trigger federal estate tax liability. Only certain high-value ones do. Specifically, the federal estate tax only applies to estates with a qualifying value that crosses a given value threshold, which is currently at $5.45 million.

So, whether estate tax matters will be among the matters that will be on a given personal representative's plate depends on the specifics of the estate. As this illustrates, a variety of different things can impact what particular responsibilities a given personal representative will have in relation to an estate. Estate administration attorneys can help personal representatives with understanding what particular duties they have, given the specifics of the estate in question.

Source: Money, "4 Things You Probably Don’t Understand About Estate Taxes," Tracy Craig, March 28, 2016

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