The answer to this question is actually both yes and no. As an overview, the Federal estate tax is a tax on your right to transfer property at your death. The fair market value of all assets in your estate, less the estate tax exemption and any lifetime gifts exceeding the gifting exclusion made, used to compute this tax. As far as the tax rate, the assets valued in excess of the tax exemption are taxed at about a forty (40%) percent tax rate.
Now to answer the question, in 2012, the IRS established tax provisions that set the Federal estate tax exemption to five (5) million dollars. The IRS further stated that each year, the exemption amount is to be adjusted for inflation. That means, each year the Federal estate tax remains at five (5) million dollars, however, the figure is adjusted for inflation making the figure larger or smaller than the preceding year depending on the economy.
For instance, in 2012, the Federal estate tax exemption was $5,250,000.00. In 2013, the Federal estate tax exemption went up to $5,250,000.00 due to inflation. The same occurred in 2014 making the Federal estate tax exemption $5,340,000.00 for individuals passing in that year. Last year, the Federal estate tax exemption was $5,430,000.00. Finally, the Federal estate tax exemption, accounting for inflation, is currently $5,450,000.00.
That being said, it is important to continue to check the Federal estate tax exemption amount on a yearly basis because the IRS can easier reduce it back to one (1) million or less, like it was in pre-2001 years. Equally important is making sure your estate planning is updated in accordance with the yearly changes so that your estate does not incur a forty (40%) percent tax.
For more information on Asset protection, Estate planning, Business Law and/or Probate please contact the attorneys of The Presser Law Firm, P.A.