Understanding the Basics

Some Basic Estate Tax Concepts

In 2020, the top tax rate remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly). The other rates are: 35%, for incomes over $207,350 ($414,700 for married couples filing jointly). The estate tax exemption to $11.58 million per individual, or $23.16 million per couple. A provision of the Tax Cuts and Jobs Act of 2017 more than doubled the exemption and raises it each year to keep pace with inflation. State death taxes paid are deductible from the federal gross estate for estate tax purposes. For amounts exceeding estate tax exemptions, Federal estate and gift tax are assessed at a flat rate of 40%.

With these multiple changes in estate tax laws, it is very important that you consult a trusted and knowledgeable estate and tax professional to help you in your planning decisions.

The unused portion of the estate tax exemption carries over to the surviving spouse. For example, if in 2019 the husband dies and does not fully use his estate tax exemption, the deceased husband's unused exemption can be attributed to the wife, so that when she dies, her estate plan can use both her unused estate tax exemption and her late husband's unused exemption. Thus, a married couple can easily shelter $22.8 million of assets.

See the section Estate and Gift Taxes for more information.


For taxable Estates in this range

Base Amount of Tax

Plus: This Rate on the Excess   

Above the Lower End of the Range

$0  to $10,000 $0 10%
$10,000 to $20,000 $1,800 20%
$20,000 to $40,000 $3,800 22%
$40,000 to $60,000 $8,200 24%
$60,000 to $80,000 $13,000        26%
$80,000 to $100,000 $18,200 28%
$100,000 to $150,000 $23,800 30%
$150,000 to $250,000 $38,800 32%
$250,000 to $500,000 $70,800 34%
$500,000 to $750,000 $155,800 36%
$750,000 to $1 Million $248,300 38%
$1 Million and Up $345,800 40%


Currently the exclusion is $11.58 million and is scheduled to remain at this high level until 2025. Many taxpayers believe that if an individual dies with assets under this amount, there is no need to file an estate tax return (Form 706). While it is true that a return may not be required, an executor needs to seriously consider the future benefit of filing a return. Doing so allows for an election to transfer the Deceased Spousal Unused Election Amount (DSUE) to the surviving spouse. This portability election increases the total exclusion available to the surviving spouse by the amount of the deceased spouse's unused exclusion. If you don't file the 706 at the first death, you cannot elect to port over this remaining amount.

2020 Annual Estate Planning Limits


Estate Planning     2019     2020   
 Annual Gift Tax Exclusion  $15,000  $15,000
 Annual Gift Tax Exclusion to a Non Citizen   Spouse  $155,000  $157,000
 Applicable Exclusion Amount:    
   Gift Tax  $11,400,000   $11,580,000 
   Estate Tax   $11,400,000  $11,580,000
 Applicable Credit Amount:     
   Gift Tax Credit Equivalent  $4,505,800  $4,577,800
   Estate Tax Credit Equivalent  $4,505,800  $4,577,800
 Maximum Estate and Gift tax rate   40%   40%
 GSTT Exclusion Amount   $11,400,000  $11,580,000
 Estate Installments (Section 6166)  $ 1,550,000  $ 1,570,000
 Special Use Valuation (Section 2032A)  $1,160,000  $1,180,000

With these multiple changes in estate tax laws, it is very important that you consult a trusted and knowledgeable estate and tax professional to help you in your planning decisions.

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