Estate is a legal term used for everything that a person owns. Estate is often used in the context of will and probate. It compromises the total assets of a person, whether real property or personal property and his entitlements, obligations and liabilities. It is the property left behind by the person when he dies. Estate can also be used in reference to extensive landed property and retained by the owner for his own use. It may comprise of the house and outbuildings and supporting farmland and woods that surround the grounds of a very large property.
To determine a person's estate and its value, assets and liabilities are appraised to determine his net estate. The valuables may include cash, investments, retirement accounts, car, household items, business interests, real estate, precious objects, antiques, personal effects and other touchable items. It also includes untouchable property such as stock and bank accounts owned by a person at the time of his passing. However, it does not include life insurance payments unless the estate was made a beneficiary in the assets or other assets that are outside the estate like joint tenancy assets.
Once the value of a persons assets are calculated the outstanding debts are determined. These can be income taxes, loans, or other type of debt. Also included is any legal fees required in settling or selling an estate. Once this has been determined you subtract the debts from the assets. This will give you the net value of a persons estate. If this amount is larger than the amount a person can leave to his heirs then it is a taxable estate and a person is liable to pay federal estate tax due to him.
The heirs of the individual who died are entitled to get the amount after paying of taxes according to the person's will. If the person did not leave a will it is taken care of by the court. The amount of taxable estate depends on the state in which person lives because there may be extra state tax as well. Therefore specific planning is necessary to make sure that assets passes in an orderly and efficient way to his legal heirs upon the death of the owner. For this an individual can choose estate planning.
A person will make a will, set up a trust and insurance, establish all power of attorneys needed and attempt to minimize taxes and administrative expenses. An estate may be subject to a higher tax rate higher than income tax. By estate planning a person can reduce their estates value through strategies. These can include nontaxable gifts and establishing irrevocable trusts. If a person is married to a US citizen they can also leave the estate to their spouse. In this case there is no estate tax to be paid. The spouse is simply given the estate, paying no taxes regardless of the value.
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