Will my estate be subject to any taxes, and if so, what types of tax?


Well, the number one tax that people worry about with the states is, of course, estate tax, but there’s relief from estate tax. For each individual living in the United States, the relief amounts to $5.49 million of assets before any estate tax is levied. For a married couple, planned properly, that amount is doubled. Income taxes, well everybody pays income taxes. If the estate or the administrative trust after someone dies continues for long enough, that trust will be reporting the income and paying the income taxes. When the assets ultimately get distributed to the beneficiaries, if there are income taxes on those assets, they will pay those income taxes. A trust has the same tax liability, in terms of income taxes, as an individual. The problem a trust has is that it pays tax at a higher rate, or I should say it pays tax at the highest rate faster than an individual does. When a trust, especially an irrevocable trust, has income in excess of $12,600 a year, it pays tax at the maximum federal rate of 36% and potentially with a 3.6% add on, paying 39.6% federally as well as state income tax.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values