Wednesday, December 29, 2010

Estate tax update | Death tax update | Inheritance tax update | new rule on Estate tax

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The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). 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.

What is included in the Estate?

The Gross Estate of the decedent consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). 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. Keep in mind that the Gross Estate will likely include non-probate as well as probate property.

America’s ‘death tax’, which was repealed in 2010, is set to be introduced in the new year i.e. 2011.

Under new laws being passed by the Obama administration, the first $5 million in value of any individual’s estate is tax-free, but all value above this figure is taxed at 35%. The tax will kick in from January 1 2011. The reintroduction of the estate tax is forcing a rethink among wealthy Indian-origin American citizens.

The reson is simple it will be taxed on world wide income. Even If NRI's move their wealth to india it will be taxed.

The estate tax is imposed on ‘all global’ movable and immovable estates of a deceased US citizen and collected from the estate’s administrator before any distribution is made to his or her inheritor.

Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify.