Will the IRS Take a Bite Out of Your Legacy?

*Liberty Financial Solutions, LLC: We worry about the IRS so you don't have to...***

Will the IRS Take a Bite Out of Your Legacy?...

International Taxation Experts — CPA Dallas-Fort Worth Metro Area

Will the IRS Take a Bite Out of Your Legacy?

First off, what is estate taxation? Well, the federal estate tax is a tax on the transfer of property at death. It applies to the total value of a deceased person’s estate before it’s distributed to heirs.

Who Has to Pay Estate Tax?

Only estates above a certain value or threshold are subject to the federal estate tax:

2024 federal estate tax exemption: $13.61 million per individual
- Meaning: If your estate is under this amount, no federal estate tax is owed.
- For married couples: $27.22 million with proper planning (called portability).
- However, this doesn't mean that once your pass away, your tax obligations are over. In fact, your heirs will at least need to file a final federal income tax return for the year of death at a minimum.

How the Tax Is Calculated

Gross Estate Value: Add up everything — real estate, bank accounts, stocks, retirement accounts, business interests, life insurance (if owned by the decedent), etc.
Subtract Deductions:
- Debts
- Funeral expenses
- Charitable bequests
- Marital deduction (unlimited transfers to a U.S. citizen spouse)
Taxable Estate = Gross Estate – Deductions – Exemptions
Estate Tax Rate: Graduated up to 40% on the amount above the exemption. It's a graduated rate just like at the individual income tax level.

Estate Taxation

Key Concepts

Portability: Allows surviving spouses to use their deceased spouse’s unused exemption.
Gift Tax Connection: Large lifetime gifts reduce your estate tax exemption (they share a unified limit).
Step-Up in Basis: Heirs receive property with its value “stepped up” to market value at death — reducing capital gains tax if sold.
Filing Form 706: Required for taxable estates or to elect portability.

State Estate or Inheritance Taxes

Some states (like Massachusetts, Oregon) have their own estate taxes, often with lower exemption thresholds (e.g. $1 million). A few others have inheritance taxes, which are paid by the recipient, not the estate. Point being, you'll want to know what state laws apply, if any.

Common Planning Strategies

Gifting during life (to reduce estate value)
Irrevocable life insurance trusts (ILITs)
Charitable trusts
Valuation discounts for family businesses or real estate

Estate taxation can become pretty overwhelming, pretty quickly. Make sure you reach out to your premier tax resolution experts at Liberty Tax Defenders to guide you through the complicated maze that is international reporting.

Cheers!

The Liberty Team

#estate #taxation #CPA #IRShelp #gifts #taxes #taxtips #taxhelp #backtaxes #taxresolution

P.S. Make sure you get your FREE copy of our SPECIAL REPORT: "The 8 Secrets The IRS Does NOT Want You To Know!" (simply click on the link in the previous sentence, scroll down to the second section of our home page, and download your copy today!)