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Estate Taxes
It is the net estate that is taxable. Estate taxes (which mirror gift taxes) can get much higher than your personal income tax, with rates climbing as high as 46%. Good estate planning is essential for any individual with assets of a million dollars or more.
The estate tax is the tax on your right to transfer property at your death. Estate tax is applied to the total value of all your possessions, called the gross estate. These possessions include cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. The gross estate can be offset by certain deductions to achieve a net estate.
Estate taxes can sap a large portion of inheritance. Without effective estate planning, taxes and other costs can have a significant impact on your estate which means the government can get more of your money and your heirs less. Not everyone has to worry about paying federal estate taxes. Your estate will have to pay estate taxes if the net value (gross assets minus debts) when you die is more than the exemption amount set by Congress. This amount is scheduled to increase over the next few years and Congress is considering abolishing the estate tax altogether.