IRA Beneficiary
27. Determining Your Net Estate
Estate taxes are calculated on the net value of your estate when you die. To determine the current net value of your estate, add up your assets, then subtract your debts. As this chart shows, include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans, and the death benefits from your life insurance.
If you die in 2008 and your net estate is less than $2 million, your estate will not have to pay any estate taxes. Remember, that is the amount of the estate tax exemption for this year, and everyone is entitled to this exemption.
But if your net estate is more than $2 million, every dollar over this amount will be taxed at 45%. That means Uncle Sam could become your biggest heir!
Now, some married couples think they can avoid estate taxes by leaving everything to their spouses when they die. And, in fact, as long as your spouse is a U.S. citizen, you can leave your entire estate to your spouse and there will be no estate taxes at your death. This is called the "unlimited marital deduction." But this can be a tax trap because it often results in a larger tax bill when your surviving spouse dies. Let's take a closer look.