The threshold for estate tax seems high to many people, so they may not consider the implications of estate tax in Wheaton probate cases. However, if a deceased individual has an ownership interest in a business, farm or other operation, estate taxes may become a concern.

With preparation, an estate planning attorney could help make moves to reduce or even eliminate estate taxes. The strategies vary according to the value and type of property involved.

Overview of Estate Tax

An estate tax is sometimes referred to as a “death tax.” That is because an estate tax is paid by the estate of someone who has passed away. The federal government collects estate tax in Wheaton probate cases and the state of Illinois also taxes estates.

However, an estate must be valued over a certain amount to be subject to estate tax. Amounts below the threshold are referred to as being exempt from estate tax. The amount changes over time, as does the rate of tax charged. Most recently, the exemption amount for state estate tax is $4 million and the exemption amount for federal estate tax is $11 million.

Valuing Assets for Estate Tax

When determining whether it is necessary to pay estate tax in Wheaton probate cases, it is crucial to look at many different types of assets and their value. These assets include:

  • Stocks, investments and bank accounts
  • Retirement accounts
  • Life insurance policies
  • Real estate
  • Cars and other vehicles
  • Business interests
  • Annuities
  • Some gifts and transfers made prior to death

Property held in trust may also be counted toward the value of an estate for estate tax purposes even though it is not part of an estate for probate purposes. Much the same, assets given directly to a spouse or held in trust for the benefit of a spouse may not be part of the assets counted for estate tax purposes. However, it is often necessary to examine taxable gifts made by a deceased person and include those amounts in the estate even though ownership of the property has been transferred.

Strategies to Reduce Estate Tax

Estate planners use a variety of strategies to reduce estate tax liability. In many cases, steps are taken to reduce the value of the estate and therefore the amount subject to taxation.

Although gifts could be taxable and become part of an estate, tax law allows individuals to make gifts up to a certain amount each year without tax implications. Making non-taxable gifts is one way to reduce the impact of estate tax in Wheaton probate cases, but to have the greatest effect, the process should begin many years before probate. Transferring certain assets to various types of irrevocable trusts could also reduce estate tax liability.

Assistance with Estate Tax in Wheaton Probate Cases

The amount of estate tax in Wheaton probate cases could be complicated to determine. Although an estate does not need to pay estate tax if the value of the estate is below $4 million, if taxes are owed, they would be calculated based on the value of the entire estate, not just the amount above the threshold. The rate of tax is graduated so amounts over certain limits are taxed higher rates.

An estate planning lawyer could help with strategies to reduce estate tax in Wheaton probate cases as well as determining whether estate taxes are owed and in what amount. The executor of an estate would need to file an estate tax return with both the state and federal governments, in addition to income tax returns on behalf of the estate. An attorney could assist with required filings and documentation.