Estate taxes are levied on the property that you leave behind. They must be paid by the estate before any inheritances are distributed to their designated beneficiaries. If you’ve accumulated significant assets in your lifetime, you can implement various estate planning strategies to reduce this final tax burden. To help you get started, here are the answers to a few questions about the basics of estate taxes.

Estate Tax FAQ

Do all estates have to file an estate tax return?

As of 2019, only estates containing combined gross assets that exceed $11.4 million must file an estate tax return with the federal government. Some states levy estate taxes as well. In Hawaii, for example, estates will be taxed by the state if their value exceeds $5.49 million. However, property left to the deceased’s surviving spouse is exempt from this tax, regardless of its value. 

How do jointly owned assets affect the value of an estate?

If you own any property jointly, only the value of your share and not of the asset in its entirety will be included in your gross estate. This could reduce the size of your estate considerably. However, it’s worth noting that any assets transferred to a revocable living trust before your passing will be included in the gross estate for tax purposes. Thankfully, an estate planning attorney can help you devise other arrangements if you want to minimize your estate’s tax burden. 

Are estate taxes and inheritance taxes the same?

Although often used interchangeably, estate taxes and inheritances refer to two different levies. Whereas estate taxes are paid by the estate before anything is distributed to beneficiaries, inheritance taxes are paid by the heirs after they receive their applicable shares. 

What is the deadline for filing an estate tax return?

The executor of the estate is responsible for filing the tax return. Typically, they have nine months from the date of death to do so; however, a six-month extension is available, which extends the deadline to 15 months. 

If you’re concerned about the government claiming a significant portion of your property upon your passing, turn to Ng & Niebling for guidance. Practicing out of Honolulu, HI, this estate planning firm has helped clients protect their family’s financial interests for more than 40 years. From drafting wills to setting up trusts, their attorneys do it all. To reach out and discuss your estate planning needs, call (808) 732-7788 or visit their website to schedule a free initial consultation.