What is my gross estate in the eyes of the IRS?

August 26, 2013 - Posted by: admin - In category:

taxes - No Responses

Last week, while doing a workshop, we were discussing this very topic.  We used the hypothetical example of “Bob and Mary” and their $700,000 estate.  When I explained that Bob and Mary were average middle-class people and that their “estate” was $700,000, I received a few strange looks.  Presumably, people were thinking that someone with $700,000 in the bank was anything but typical and certainly not to be considered middle-class.  I then explained the concept of “estate” for purposes of the IRS’s system of reckoning and accounting (i.e. how the tax man look at the issue).  The answers to common questions below are taken directly from the IRS website:

What is included in my gross estate?

In summary, your gross estate for purposes of estate planning and in the eyes of the IRS, “consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.” (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Estate-Taxes#2)

What is excluded from my gross estate?

“Generally, the gross estate does not include property owned solely by the decedent’s spouse or other individuals. Lifetime gifts that are complete (no powers or other control over the gifts are retained) are not included in the gross estate (but taxable gifts are used in the computation of the estate tax). Life estates given to the decedent by others in which the decedent has no further control or power at the date of death are not included.” (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Estate-Taxes#2)

What deductions are available to reduce my gross estate?

  1. Marital Deduction: One of the primary deductions for married decedents is the Marital Deduction. All property that is included in the gross estate and passes to the surviving spouse is eligible for the marital deduction. The property must pass “outright.” In some cases, certain life estates also qualify for the marital deduction.
  2. Charitable Deduction: If the decedent leaves property to a qualifying charity, it is deductible from the gross estate.
  3. Mortgages and Debt.
  4. Administration expenses of the estate.
  5. Losses during estate administration.”

(http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Estate-Taxes#2)

Please contact us to discuss this in more detail, including how these rules apply to your specific situation.

At Pharos Law Group, we specialize in legacy and estate planning. That’s all we do.

We are a member of the American Academy of Estate Planning Attorneys** and the National Academy of Elder Law Attorneys.

Please contact us to schedule a FREE consultation. We have offices in Logan, Clearfield and Salt Lake City, Utah.

**Consumer Reports Money Adviser (January 2009) has recommended the American Academy of Estate Planning Attorneys to consumers looking for qualified attorneys. This comes in addition to several recent recommendations by Forbes Magazine, Money Magazine and Suze Orman in her book, 9 Steps to Financial Freedom. For more information about our office and the Academy visit our website at www.utahlivingtrust.com.

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