Estate Taxes

The estate tax can be a confusing topic, partly due to ongoing congressional changes to laws regarding the estate tax. First, Arizona does not have its own estate tax. If you own property in other states, some states have their estate or inheritance tax. Click here to view other state estate and inheritance taxes.

At this time, Arizona residents with property only in Arizona only need to concern themselves with the federal estate tax. As of 2015, individuals with estates under $5.43 million and married couples with estates under $10.86 million are not subject to the estate tax.

Any amount over that limit is taxed at a maximum rate of 40%.

What will happen beyond 2013 is anybody's guess. Below is a quick recent history of the estate tax:

A ten-year federal estate tax plan enacted in 2001 through 2011 increased the federal estate tax limit gradually from $675,000 in 2001 to $3.5 million in 2009, a repeal of the estate tax in 2010 and then a return to $1 million in 2011. Congress debated throughout 2010 what to do before at the beginning of 2011 instituting a three year plan of a $5 million limit in 2011, $5.12 million in 2012.

History of Estate Tax Limits and Rates

Estimating Your Estate Tax Liability

For very simple purposes, total your personal assets and subtract your liabilities. If you have any estate tax concerns, contact an estate planner.

To calculate your gross assets, first determine if an asset is owned solely by you or is owned jointly with rights of survivorship. If owned solely, count 100% of the value. If owned jointly, include only 50% of the value.

• Bank accounts
• Investment accounts
• Stocks and bonds
• Personal effects (jewelry, antiques, collectibles, art, guns, etc.)
• Automobiles
• Boats and airplanes
• Real estate
• Life insurance owned by you - for example if purchase a $1 million life insurance policy, the $1 million would count as an asset in your estate tax calculation.
• Money owed to you
• Trust assets of which you are a beneficiary in which you have a "general power of appointment"
• Taxable lifetime gifts in excess of the annual gift tax exclusion
• Some transfers made within 3 years of your death

• Debts and expenses
  • Mortgages
  • Lines of credit
  • Personal loans
  • Credit card debt
  • Funeral expenses
  • Medical bills
  • Administrative bills to settle the estate
• Charitable gifts
• Transfers to a spouse who is also a U.S. citizen

Examples

1. If you pass in 2015 and your gross estate is valued at $1 million - $5.43 million estate tax exemption = No estate tax due

2. If you pass in 2015 and your gross estate is valued at $6.25 million - $5.43 million estate tax exemption = $1,000,000 is subject to estate taxes.

3. If married and you both pass in 2015 and your gross estate is valued at $6.25 million - $10 million estate tax exemption = No estate tax due

Minimizing Estate Tax Exposure

Prior to 2011, married couples needed an A-B trust or Bypass/Disclaimer Trust to each get an exemption. New laws remove that need but one never knows how future legislation may develop. Four Peaks Planning, Inc. typically creates Bypass/Disclaimer Trusts for all married couples.

There are variety of strategies using irrevocable trusts, such ILITs, CRATs and CRUTs, to potentially minimize estate taxes for estates. Four Peaks Planning, Inc. has several qualified attorneys who we refer these clients to for legal advice.

Other States' Estate and Inheritance Taxes

Please note we do our best to keep other states' information current but some information may be dated. Consult a professional in the particular state(s) in which you own assets.