With the new tax bill signed by the Trump Administration, estate tax liability and rules have significantly changed. Under the bill, between the years 2018 and 2025, estate taxes will not need to be paid on estates of up to $11.4 million. For couples, no estate taxes will need to be paid for inheritances of up to $22.8 million. The new law doubles the amount of money exempted from the estate tax from years previously. Use our estate tax calculator to find out where you stand.
How Much Will I Need to Pay?
Estate taxes are on a scale, just like the income tax bracket. Rates for estate taxes vary from 17% to 40%, depending on the size of the estate.
To determine how much you will need to pay, you will first need to determine the total value of your estate. Then you can deduct the following:
- Expenses and Debts Related to the Estate: This includes legal and administrative costs related to settling the estate, insurance and court fees, appraisal costs, lines of credit, paying off credit cards, memorial and funeral costs, final medical bills and the other expenses related to end of life and settling an estate.
- Transfers to a Spouse: Some individuals can create trusts or can use an outright transfer by right of survivorship to give some of their estate to a US citizen spouse, thus protecting part of the estate from estate taxes.
- Donations: Charitable transfers made to a Charitable Lead Trust or Charitable Remainder Trust are deductible from estate taxes.
In addition, some higher-income earners and those with large estates will seek to minimize estate taxes by creating trusts or using other instruments during their lifetimes to ensure their money goes where they intend, while also lowering the tax burden on beneficiaries.
Once you have subtracted deductions from the total value of the estate, you have the net value. From this value, you can calculate your federal estate tax exemption and any taxable gifts you have made. The result is your taxable estate. From that, you can determine the taxes your beneficiaries will need to pay by multiplying by your tax rate.
Understanding your estate tax allows you to create additional estate plans to ensure your beneficiaries get the money you want them to receive. It can also help your beneficiaries plan their lives. If your inheritors need a specific amount for continuing a business, paying for their own medical expenses or other important tasks, evaluating estate taxes can help you see whether they have enough.
For a simpler way to evaluate your potential taxes, use the Money Help Center estate tax calculator. This free and unbiased calculator lets you understand how much your beneficiaries may expect to pay. As you will notice, this is a tax mostly to be considered among those who are very affluent. You can calculate further on how Trump’s tax plan affects you and your tax liability with our Trump tax reform calculator.
Money Help Center has other calculators to help you and your family plan for the future.