Estate Tax Liability

(redirected from Estate Taxes Payable)

Estate Tax Liability

The amount an estate owes to the government before it can be distributed to heirs. The estate tax liability is calculated as a certain percentage of the value of an estate after all the debts of the deceased are repaid and certain deductions are taken. However, there is no estate tax liability calculated on the first $1 million (sometimes more) of an estate's value.
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A CST (also known as an A/B trust) is typically used to minimize the combined estate taxes payable by spouses.
Additionally, the decedent's will provided that the estate taxes payable on the property constituting his gross estate were to be paid from the principal of his residuary estate before any distribution to the foundation.
If the gift had not been made, the same appreciation would only have served to increase the donor's estate and, accordingly, any estate taxes payable. (Note that the capital gains step-up at death is usually forfeited ff the trust is funded during life, so that it is best to fund a dynasty trust with cash or with assets that have not yet appreciated substantially); and