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When individuals die, the estates they leave can be subject to depletion by taxes
and by costs associated with disposition of the estate, especially when there has been no planning to minimize these costs. One group of costs is associated with events preceding or arising from the individuals death, and can include:Medical expenses incurred immediately prior to the death
Funeral and burial expenses
Debts that are unpaid at the death of the individual
Fortunately, individuals can prepare for all of these expenses,
establishing in advance a means for paying them that will help keep the estate intact. Costs are also incurred in the administration of a deceased persons estate. Typically referred to as probate fees, these expenses can include:
Attorneys fees
Executors fees
Court costs and other probate expenses
In addition, estates in excess of the current exemption ($1.5 million in 2004 and 2005) are subject to federal estate taxes. Many states also impose death taxes. Again, it is possible to anticipate these amounts and make provisions to reduce them and to pay them promptly following death.
For larger estates, the most burdensome expense is often the federal estate tax. If an estate totals $1.5 million or less (in 2004 and 2005), no federal tax applies. This estate tax exemption gradually increases, reaching $3.5 million in 2009.
Corresponding to the increase in the exemption is the gradual decline of the top estate tax ratefrom 48% in 2004 to 45% for years 2007-2009. The federal estate tax is repealed effective for decedents dying on and after January 1, 2010. However, repeal is effective only for the year 2010, after which the estate tax is scheduled to resume on January 1, 2011, unless the law is amended in the intervening years.
Also in 2011, the top rate jumps back up to 55%, the rate that was in effect in 2001 before the law was changed. What the amount of the estate tax exemption will be in 2011 when the tax resurfaces is unclear.
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