Please Explain About What Estate Tax is and Why it's Important
Estate taxes can be both federal and state taxes that are levied upon the transfer of assets at the time of death (in other words: inherited assets). They usually only applies to large fortunes that have been accumulated over a lifetime. This usually varies from state to state and the federal Estate tax has recently been very limited, however, that could change in the near future. When a person passes on, his or her assets (known as their Estate) are distributed to their heirs which can be family members as well as friends and charities. Both the federal government and most states have a set tax-exempt amount over which the estate must rise before it is taxable.
However, if the total value of the chargeable estate is larger than that tax-exempt amount, then an estate tax is enforced against the portion over the exemption and must be paid before the rest of the Estate assets are distributed to the heirs. Any amount given to a spouse or charity is tax exempt. However, there are other ways to avoid Estate tax which will be explained in other segments.