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  • Rachel J. Leos

What is Estate Tax? Update on 2018 Federal Estate Tax Exemption Amount

Happy New Year! After a brief hiatus for the holidays and a very busy end to 2017 here at Leos & Gilkerson, PLLC, we are happy to be back with another estate planning blog post.

We have been getting lots of questions about the recent tax reform and how it affects individuals in their estate planning. This blog post will briefly describe both the Washington and the Federal Estate Tax.

What is Estate Tax?

According to the IRS, the “Estate Tax” is a tax on your right to transfer property at your death.

What portion of my estate will be taxed?

To calculate Estate Tax, upon your death, an accounting of everything you own or have certain interest in at the time of your death (including cash and securities, real estate, insurance, trusts, annuities, business interests and other assets) will be valued at its fair market value, the total of which is called your “Gross Estate”. The Gross Estate will be reduced for certain deductions such as mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities, and reductions for business operations or farms, to calculate the “Taxable Estate.” Thereafter, lifetime taxable gifts will be added to the “Taxable Estate” and reduced by any available “Unified Credit” to find the “Net Taxable Estate,” for which the estate tax will be based.

How much of my estate can pass tax free in 2018:

  • $2,193,000.00 of your estate can pass free from State of Washington estate tax

  • $11,200,000.00 of your estate can pass free from Federal Estate Tax

The Federal Estate tax exemption was doubled as part of the new tax reform. The doubled exemption amount will sunset and revert back to the pretax reform rates in 2025.

How is the Federal Estate Tax calculated?

Estates in excess of the exemption amount are subject to a 40% tax on all assets over the exemption.

With a federal exemption rate this high, the majority of the tax planning clients will need at this point in time is for Washington estate tax. We are happy to assist clients with their estate planning needs. Feel free to email us with any questions.

Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only, and should not be construed as legal advice from Leos & Gilkerson, PLLC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a licensed lawyer.

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