When it comes to the Internal Revenue Service, Americans are taxed for almost everything, including their right to transfer property to their loved ones when they die. This right is known as an estate tax and is an important part of estate administration and probate. For those in Washington who are contemplating how to divide their estates, this tax may be something to keep in mind.
Basically, everything that a person owns or has an interest in when he or she dies is accounted for. In order to sum up these assets, the fair market value is used, not how much the person valued the asset or even what he or she paid for it. Once it is all added up, the total is known as the gross estate.
There are some deductions that are allowed, and in some cases, a reduction in the value of some assets may be allowed. Deductions for this may include various debts, such as a mortgage, property that is passed down to certain charities or a surviving spouse, and the administrative expenses of the state. In a few cases, the worth of a farm or business might be reduced to qualified estates. Once those are figured in, the total is known as the taxable estate.
While there are several more steps to determining the estate tax during estate administration and probate, the transfer of the property is not actually taxable in Washington or other states. Only when the person who inherited the property chooses to sell it can it be taxed. A knowledgeable estate planning attorney can explain all of the ins and out of this type of tax to his or her client and help them to decide what steps needed.
Source: standard.net, “Talkin’ Taxes: the estate tax“, Tracy Bunner, June 28, 2017