As part of his or her duties, your personal representative will file tax returns for your estate to report the assets of your estate. The personal representative will also file an estate income tax return to report any income generated by your estate. Federal estate taxes are the highest in the federal tax code. Currently, estate tax is levied on decedents’ estates when the estate is valued over $675,000. This exclusion amount will rise in annual increments to $3.5 million in 2009. Federal estate tax rates range between 37% and 50% in 2002. Prior to 2002, the federal estate tax rate was 55%. This tax rate will drop 1% each year until it reaches 45%. The Federal Estate Tax begins in ยง 2001 of the Internal Revenue Code. (26 U.S.C. 2001). Merely making and executing a will does not reduce federal estate tax. However, through competent legal advice on estate planning, including the careful crafting of your will, you can minimize or avoid these taxes. Such tax benefits would not be available to you and your family if you died without a will.

Inside Taxes