Bellmore's Tax Service
Bellomre's Former IRS Agent

Estate Taxes

The money and property you own when you die (your estate) may be subject to federal estate tax. Learning about estate and gift taxes -- and preparing in advance to avoid or reduce them -- can save your inheritors a bundle. Estate tax may apply to your taxable estate at your death. Your taxable estate is your gross estate less allowable deductions.

Gross Estate

Your gross estate includes the value of all property in which you had an interest at the time of death. Your gross estate also will include the following.

Life insurance proceeds payable to your estate or, if you owned the policy, to your heirs.
The value of certain annuities payable to your estate or your heirs.
The value of certain property you transferred within 3 years before your death.
Trusts or other interests established by you or others in which you have certain powers.
Taxable Estate

The allowable deductions used in determining your taxable estate include:

1) Funeral expenses paid out of your estate,
2) Debts you owed at the time of death, and
3) The marital deduction (generally, the value of the property that passes from your estate to your surviving spouse).

Gift Tax

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced interest loan, you may be making a gift. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

  • Gifts that are not more than the annual exclusion for the calendar year.
  • Tuition or medical expenses you pay for someone (the educational and medical exclusions).
  • Gifts to your spouse.
  • Gifts to a political organization for its use.
  • Gifts to qualified charities (a deduction is available for these amounts).
  • Annual Exclusion

A separate annual exclusion applies to each person to whom you make a gift. For 2002, 2003 and 2004, the annual exclusion is $11,000. Therefore, you generally can give up to $11,000 each to any number of people in 2002, 2003 and 2004 and none of the gifts will be taxable. If you are married, both you and your spouse can separately give up to $11,000 to the same person in 2002, 2003 or 2004 without making a taxable gift. Gifts to individuals are not deductible on the donor's income tax returns.

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Phone: 810-230-8885 | 1408 W. Hill Rd., Suite C, Flint, MI 48507