IRA Beneficiary
27. Determining Your Net Estate
Estate taxes are calculated on the net value of your estate when you die. To determine the current net value of your estate, add your assets, then subtract your debts. As this chart shows, include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans, and the death benefits from your life insurance.
Let's say you die in 2011 or 2012, when the estate tax exemption is $5 million. If your net estate is less than this, your estate will not have to pay any estate taxes. But if your net estate is more than $5 million, every dollar over this amount will be taxed at 35%.
With the exemption so high, you may not be concerned with estate taxes right now. But, it's important to understand how this works, because the exemption may be reduced in the future, as early as 2013, and the value of your estate may increase substantially by the time you die.