Most people will not have to pay federal estate taxes because the threshold is so high. However, if you have significant assets, you should check the value of your estate so that you can plan if your estate will have to pay taxes.
The IRS handles federal estate taxes. Federal law also sets the rules for the valuation of estates.
Rules for valuing estate assets
You will value your assets based on fair market value. This is the amount it is worth at the time of your death if you were to sell it. It does not account for how much you paid for it or the value of the asset when you created your estate plan. This amount will give you the taxable estate.
Alterations to your value
Once you have the taxable estate value, you may be able to take some deductions that will reduce the number. Deductions include things that are not taxable, such as some business operating expenses, gifts to spouses and expenses related to estate administration.
However, you will have to add in the value of any gifts you received that are taxable. Still, you also receive a unified credit, which will further reduce your taxable estate amount.
Once you know what your estate is worth, you will need to check the filing threshold. This does depend on your year of death, so you will need to estimate. It increases every year. For 2023, the amount was $12,920,000.
As long as your estate is not worth equal to or more than the threshold, you do not have to pay federal estate taxes. It is essential to ensure you value your assets properly if you are near the threshold amount.