Federal estate tax is levied on the privilege of transferring property to a person’s heirs upon death. The tax is imposed on the value of the decedent’s taxable estate, which is calculated by subtracting allowable deductions from the decedent’s gross estate. The gross estate consists of all property owned by the decedent at death, all property in which the decedent had an interest, certain gifts made within three (3) years prior to decedent’s death, and life insurance on the decedent’s life.
If the estate is subject to federal estate tax, a tax return must be filed and tax paid within nine (9) months of the decedent’s death, unless an extension is requested and granted. Unpaid federal estate tax is a “silent” lien on all property of the estate. The silent lien continues for a period of ten (10) years from the decedent’s death.
Federal tax is owed only when the estate’s value is greater than certain threshold exemption amount. The following is a chart of the estate tax exemptions applicable to estates of decedent’s dying between 2004 and 2016:
| Year | Exclusion Amount |
| 2004 | $ 1,500,000.00 |
| 2005 | $ 1,500,000.00 |
| 2006 | $ 2,000,000.00 |
| 2007 | $ 2,000,000.00 |
| 2008 | $ 2,000,000.00 |
| 2009 | $ 3,500,000.00 |
| 2010 | $ 5,000,000.00** |
| 2011 | $ 5,000,000.00** |
| 2012 | $ 5,120,000.00 |
| 2013 | $ 5,250,000.00 |
| 2014 | $ 5,340,000.00 |
| 2015 | $ 5,430,000.00 |
| 2016 | $ 5,450,000.00 |
**Estate can “opt out” of paying estate taxes altogether.
If you have questions about Federal Estate tax, please contact Attorney Matz for advice on estate planning and administration.