Estate Tax(p4)

Estate tax may apply to your taxable estate at your death. Your taxable estate is your gross estate less allowable deductions.

Your gross estate includes the value of all property you own partially or outright at the time of death. Your gross estate also includes the following:

• Life insurance proceeds payable to your estate or, if you owned the policy, to your heirs;
• The value of certain annuities payable to your estate or your heirs; and
• The value of certain property you transferred within 3 years before your death.

The allowable deductions used in determining your taxable estate include:

• Funeral expenses paid out of your estate,
• Debts you owed at the time of death,
• The marital deduction (generally, the value of the property that passes from your estate to your surviving spouse),
• The charitable deduction (generally, the value of the property that passes from your estate to the United States, any state, a political subdivision of a state, the District of Columbia, or to a qualifying charity for exclusively charitable purposes), and
• The state death tax deduction (generally any estate, inheritance, legacy, or succession taxes paid as the result of the decedent's death to any state or the District of Columbia.

For more information on what is included in your gross estate and the allowable deductions, see Form 706 and Form 706-NA and their instructions.

Basically, any unified credit not used to eliminate gift tax can be used to eliminate or reduce estate tax. However, to determine the unified credit available for use against the estate tax, you must complete Form 706.

An estate tax return must be filed if the gross estate, plus any adjusted taxable gifts and specific gift tax exemption, is more than the basic exclusion amount. Beginning in 2010, the basic exclusion amount is $5,000,000; it will be indexed for inflation starting in 2012. The basic exclusion amount is generally equal to the filing requirement.

Adjusted taxable gifts is the total of the taxable gifts you made after 1976 that are not included in your gross estate. The specific gift tax exemption applies only to gifts made after September 8, 1976, and before January 1, 1977.

The applicable exclusion amount is the total amount exempted from gift and/or estate tax. For estates of decedents dying after December 31, 2010, the applicable exclusion amount equals the basic exclusion amount plus any deceased spousal unused exclusion (DSUE) amount. The DSUE is the remaining applicable exclusion amount from the estate of a predeceased spouse who died after December 31, 2010. The DSUE is only available where an election was made on the Form 706 filed by the deceased spouse's estate.

The following table lists the filing requirements for estates of decedents dying after 2001.

Year of Death:	File return if estate's value is more than:
2002 and 2003	1,000,000
2004 and 2005	1,500,000
2006, 2007, and 2008	2,000,000
2009	3,500,000
2010 and 2011	5,000,000
2012	5,120,000

If you think you will have an estate on which tax must be paid, or if your estate will have to file an estate tax return even if no tax will be due, see Publication 559, Form 706, Form 706-NA, and the forms' instructions for more information. You can get publications and forms from the IRS website at www.irs.gov. You (or your estate) may want to speak with a qualified tax professional to receive help with estate tax questions.