Survivorship A to Z -

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Estates are subject to federal and state taxes.

The federal estate tax has varied over the past few years.

As of January 1, 2011, the federal estate tax is 35% on estates valued over $5,000,000. Inherited assets receive a stepped-up basis.
For 2012, the amount of the exemption will be subject to an index.
In 2013, the exemption is scheduled to return to $1,000,000 with a top rate of 55% unless Congress acts.

Gross taxable estate includes all assets you own or in which you have an interest at the date of death.

As a general matter, stocks and other securities, bonds, cash, real estate, business interests, trusts, and other assets are includible. Life insurance is included in your estate if you own the policy at date of death.

There are additional rules for assets which are includible in gross estate, such as assets which are transferred in contemplation of death and taxable gifts. Gifts which are tax free are not included.

The assets are valued at fair market value - not the amount you paid for them or the value on the date they were acquired.

To learn more, see: IRS Publication 950: Introduction to Estate and Gift Taxes http://www.irs.gov/publications/p950/index.html offsite link and Form 706: United States Estate (And Generation-Skipping Transfer) Tax Return, available at: http://: www.irs.gov/pub/irs-pdf/f706.pdf . The instructions for Form 706 are available at: www.irs.gov/pub/irs-pdf/i706.pdf