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Determine Your Estate Tax Liability


Determine Your Estate Tax Liability

Chris Bibey
by Chris Bibey

One of the best ways to determine your estate tax liability is with a tax calculator. It is good to know how much money you will owe, so that you can plan for this accordingly. Along with this, even if you do not owe tax right now you can determine how much you could owe in the future should you inherit an estate. Using a tax calculator makes this process much simpler than trying to figure out the formula “long hand.”

In 2011, federal estate taxes will be charged on all estates with a total value of more than $1 million. Of course, Congress has the right to make changes before 2011. With the right tax calculator you can determine your liability now, as well as if any changes are made before 2011 arrives.

TAX CALCULATOR: What Is My Potential Estate Tax Liability?

As you begin to use the above estate tax calculator, you will find that you need some very specific information. While it is best to use exact numbers, you may have to estimate until you get your hands on more accurate figures.

There are two main parts to the estate tax calculator:

Tax Calculator Part 1: Assets/Liabilities and Assumptions
Part 1 of this tax calculator has three sections: Personal Assets, Investment Assets, and Business Assets. For each section, you must provide a figure for Value (as a dollar amount), Growth (as a percentage), and Liability (as a dollar amount).

Tax Calculator Part 2: Assumptions
Part 2 of this tax calculator also has three sections: Charitable Contributions (as a dollar amount), Probate and Final Expenses (as a percentage of the gross estate), and Years to Project Estate Growth (number of years).

Once you fill in all this information, click “Submit” and the tax calculator will generate your results. If you do not have sufficient enough assets to be charged federal estate tax, that information will be provided in the results box.

When the tax calculator results appear, you will see the following lines of information: Appreciated Personal Assets Less Debt, Appreciated Investment Assets Less Debt, Business Assets Less Debt, Appreciated Net Estate, Probate and Final Expenses, Charitable Donations, Appreciated Net Taxable Estate, Tentative Tax Liability, Unified Credit, Federal Estate Tax Liability, and Estate Reduction Due to Taxes.

The line that you want to pay attention to is “Federal Estate Tax Liability,” which tells you how much money you owe in federal estate tax.

With a tax calculator, it is much easier to determine how much (if anything) you may owe to the IRS in estate taxes. It’s a good idea to have a grasp on your estate tax liability, and consider consulting a professional estate planner, to avoid making costly mistakes.