The net value of all the property owned by a deceased as of the date of death is used to compute an estate tax. The net taxable estate is calculated by subtracting the estate's tax from the overall worth of the deceased's property. The estate is responsible for any tax liabilities that arise.
There was a time when every state imposed an estate tax. The federal estate tax return provided a credit against state-level estate taxes, and states used this federal credit to set their tax rates. However, the benefit was abolished as a result of changes to the federal tax code. As a result, many states have abolished their estate taxes.
As of 2019, estate taxes are collected at the state level in over 12 states. Exemptions are available in every state that collects an estate tax, and the value of these exemptions varies. Only the portion of an estate's net value that exceeds the exemption level is taxed, and the tax is deducted from the top of the estate before any remaining assets can be bequeathed to beneficiaries.
In terms of the federal estate tax, very few estates are subject to it because the exemption is $11.7 million as of 2021. The tax applies only to estates worth more than this amount.
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