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What is a Taxable Estate?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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The taxable estate is composed of the assets left behind by a deceased person that are still subject to some type of taxation action. There are many different types of assets that can be considered to be part of a taxable estate. Even people who do not posses a great deal of property or similar assets are likely to have at least a portion of their final estate subject to taxes of some type.

An example of a taxable estate item would be real estate holdings that are jointly owned with a spouse. Because many jurisdictions interpret joint ownership to mean that each individual in the partnership own one half of the holding, half of the value of a home or other real estate will be considered part of the assets of the deceased and may be subject to inheritance or other types of taxes. When no joint ownership can be proven, the total value of the property is considered to be subject to taxes.

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Other types of assets can be included in a taxable estate. Investments such as stocks or bonds are easily included and are likely to carry a tax burden. Any cash assets, such as funds contained in a savings or checking account, will also be considered part of the taxable estate. When the payoff on a life insurance policy is set up to pay to the estate of the deceased, that amount may also be taxable. Even assets that remain in individual retirement accounts or other types of pension or profit sharing plans may also be subject to taxes, depending on how the account is structured.

Even trusts where the deceased had direct control may constitute an asset that can be considered part of a taxable estate. In most countries, the only way to exclude a trust from taxation is to set up the trust so that there is no direct control and there is no way for the trust to be revoked once it is created and set in place. When there is any benefit derived by an individual from an established trust, there is a good chance that the asset will be counted as part of the taxable estate.

Many people attempt to reduce the amount of their taxable estate by arranging assets so they are exempt from taxation. For example, many retirement plans can meet government requirements that make it possible to exclude the asset from the taxable estate. Financial planners and counselors can often assist people in evaluating their assets and design and estate plan that makes use of every relevant and legal device to minimize the tax burden.

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