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Gregory S. DuPont Dec. 27, 2019

Many individuals wonder how the federal estate tax law applies to them. How will it affect their beneficiaries after death? The federal estate tax is an excise tax on the right to transfer property at the time of death. An inheritance tax is a tax on the right to receive property from someone who has died.

The items that comprise your gross estate are specifically clarified in the Internal Revenue Service Code (the Code) on taxation. It includes any and all property in which you have an interest. The IRS defines it this way: “The gross estate of a decedent who is a citizen or resident of the United States at the time of his death includes the value of all property whether real or personal, tangible or intangible, and wherever situated, beneficially owned by the decedent at the time of his death.”

Among those items includable in your estate are your rights to future income. For example, your right to payments under a deferred compensation agreement or partnership income continuation plan. Such rights are commonly referred to as “income in respect of a decedent (IRD),” and are included at their present commuted value. Your interests in any business you own at your death, whether as a proprietor, a partner, or a shareholder in a corporation, are likewise includable in your gross estate. However, the value of Social Security survivor benefits, either lump sum or monthly annuity, is not included in your gross estate.

The actual task of determining what is includable in your gross estate often requires in-depth analysis by a qualified professional.