Estate Taxes: What You Need to Know

February 3, 2021

Attorney Shanna Yonke attempts to simplify how the federal government’s estate tax works in her latest vlog.

Video Transcript:

My name is Shanna Yonke, and I’m an attorney on Ruder Ware’s Estate Planning Team. My topic for today is the estate tax. Wisconsin does not impose an estate tax. Our state legislature repealed the estate tax, effective December 31, 2007.

The federal government does impose an estate tax. Here’s how it works: Upon your death, you can transfer a certain amount of assets without paying any estate tax. This is called the estate tax exemption amount. In 2021, the estate tax exemption is $11,700,000.

This amount is adjusted for inflation on an annual basis. The gift and estate tax exemptions are “unified,” meaning that lifetime gifts will reduce the amount that you can transfer upon your death without paying any estate tax. This reduction is dollar-for-dollar.

Upon your death, your remaining estate tax exemption is calculated by reducing the current estate tax exemption by the value of your lifetime gifts. For example, if you die in 2021, your estate tax exemption is $11,700,000. If you made lifetime gifts worth $11,000,000 your remaining estate tax exemption is $700,000. If you transfer assets in excess of your remaining estate tax exemption, your estate will be subject to a 40% estate tax on every dollar over your remaining exemption amount. So, for example, if your remaining estate tax exemption is $700,000, and upon your death you transfer $1,700,000, your estate will pay estate tax equal to 40% of $1,000,000 which is $400,000.

This explanation of the estate tax is greatly simplified. If you have questions regarding the estate tax, please feel free to contact any attorney on Ruder Ware’s Estate Planning Team.

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