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Getting Started on Your Estate Plan: Inventory and Value Assets; Estimate Tax Liability

09.26.16 | T&E Chat

The estate planning process requires answers to two basic questions: what is your estate worth? Is your estate taxable? A good place to begin the estate planning process is to work with us to answer these questions.

What is your estate worth?

First, list all of your assets and their value. If you’re married, do the same exercise for your spouse’s assets. Be careful to review how the assets are titled and to include them correctly in each spouse’s list.

If you own a life insurance policy at the time of your death, the proceeds on that policy usually will be includable in your estate. Remember: That’s proceeds. If your estate is large enough, a significant share of those proceeds may go to the government as taxes, not to your chosen beneficiaries.

Is your estate liable for tax?

Here’s a simplified way to project your federal estate tax exposure:

  • Take the value of your estate, net of any debts.
  • Subtract any assets that will pass to charity on your death.
  • If you’re married and your spouse is a U.S. citizen, subtract any assets you’ll pass to him or her. Those assets qualify for the marital deduction and avoid potential estate tax exposure until the surviving spouse dies.

The net number represents your taxable estate.

You can transfer up to your available exemption amount at death free of federal estate taxes. So if your taxable estate is equal to or less than the estate tax exemption (for 2016, $5.45 million) reduced by any gift tax exemption you used during your life, no federal estate tax will be due when you die. But if your taxable estate exceeds this amount, it will be subject to federal estate tax.

Questions about gift and estate planning strategies?  Contact  me at SDitman@BerdonLLP.com or your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, New York Accountants, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.