Estate Tax Calculator

This is a calculator for the estimation of federal estate (inheritance) tax for the residences in the United States based on assets and Liabilities. This estate tax calculator uses the exemption and tax rate based on the "2010 Tax Act" signed by President Obama on December 17th, 2010. Many states also impose an estate tax, with the state version called either an estate tax or an inheritance tax. Please click here to check the state specific laws. In most situations, the state estate taxes are much smaller in amount compared with the federal tax.

Assets
Residence & Other Real Estate $
Stocks, Bonds, and Other Investments $
Savings, CDs, and Checking Account Balance $
Vehicles, Boats, and Other Properties $
Retirement Plans $
Life Insurance Benefit $
Other Assets $
Liability, Costs, and Deductibles
Debts (mortgages, loan, credit cards, etc) $
Funeral, Administration, and Claims Expenses $
Charitable Contributions $
State Inheritance or Estate Taxes $
 

Exemptions and Tax Rates

YearExemptionsTax Rates
2001$675,00055%
2002$1 million 50%
2003$1 million 49%
2004$1.5 million 48%
2005$1.5 million 47%
2006$2 million 46%
2007$2 million45%
2008$2 million45%
2009$3.5 million45%
2010Repealed0%
2011$5 million35%
2012$5.12 million35%
2013$5.25 million40%
2014$5.34 million40%
2015$5.43 million40%
2016$5.45 million40%

What is Estate Tax?

When a person dies, the properties and funds that belong to that person are transferred to the heirs. But that property may be taxed by the government, and the tax is called the Estate Tax (the property left to us by our loved ones is called an 'Estate'). The estate tax in the United States is one part of the Unified Gift and Estate Tax system. The other part of the system, the gift tax, imposes a tax on transfers of property during a person's life; the gift tax prevents avoidance of the estate tax should a person want to give away his/her estate just before dying.

Avoiding the Estate Tax

In the United State, there is a basic exclusion from the Federal Estate tax, which is $5.45 million per person for 2016. Once above the exclusion, estates are taxed at 40 percent. However, most people who even have funds above that amount don't wind up paying any estate tax at all according to the Urban-Brookings Tax Policy Center. Among the 3,780 estates that owe any tax, the "effective" tax rate — that is, the percentage of the estate's value that is paid in taxes — is 16.6 percent, on average. Estate and gift taxes, the congressional budget office noted, raised only about $14 billion in federal revenue in 2012. That's about one percent of the more than $1 trillion in wealth that changes hands in inheritance and gifts each year.

The effective rate is so low because, first of all, the tax is only owed on that part of the estate above the exclusion. But it's also easy for tax planners to help the wealthy to shield part of their taxable estate. For example, parents 'sell' part of their assets to children at discount rates, and take the tax hit themselves. Trust funds can be used to set income aside from estate taxes. There are a number of such loopholes to be taken advantage of.

Estate Planning

Apart from just avoiding Estate Taxes, good estate planning can help to ensure the smooth transition of wealth transfer from one generation to another. Such a plan ensures that family financial goals are met.

Inheritance can cause great friction within a family. By setting up an estate plan and having the whole family agree to it, such friction can be avoided.

The first step is to take inventory of all the assets a family owns. Don't neglect small things. Sometimes a little work of art, or a piece of jewelry can have great sentimental value, even if it isn't worth a lot of money. It's best to avoid having disputes arise over any piece of property.

Then, it's important to draw up the right documents. These include a will, which shows to whom each asset is left, an assignment of power of attorney, so that one person may handle major issues, and a living will or health-care proxy (medical power of attorney), so that medical decisions can be made for those who are no longer able to make them. It's important to go over these with a lawyer as they must be mindful of both federal and state laws governing estates.

If there are sufficient assets to be distributed, the use of trusts is often recommended. Trusts are independent organizations that are managed to distribute the family's assets. They allow preconditions on how and when assets will be distributed. They protect heirs from creditors and offer significant tax protection.