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When it comes to the planning of property, we all become very concerned. That’s true. We want to make sure that our property is in the safe hands after our death. Unfortunately, talking about death can be very dreadful because no one wants to die. But it is a fact and we have to talk about it so we may know what the laws are in case someone leaves his /her property to the heirs. What does the law say about estate tax and how to deal with it? These are some question which is supposed to be answered. Most of us do not know about these because the majority of people are not aware of the laws.
So, first of all we need to understand this term. What is an Estate Tax? An estate tax is applied when the property is inherited to the heir. It is applied to the amount of the asset he/she has received. But there is a one condition which has to be strictly followed. If the value of the estate is above the prescribed limit of the law, then you have to pay the estate tax. Otherwise, if the value of your inherited property is under the limit, you are free to use it without paying any estate tax. When we talk about estate tax, we have to keep in mind that if you are transferring the property to the person (spouse actually) who is alive then in this condition the tax does not apply. The whole idea is very easy to understand. There are not hard and fast rules in it. The spouse has all the rights to use the property and he/she can transfer the property further. There is one condition where you can say comes the twist. If the spouse dies, his inherited estate will automatically be transferred to the heirs and then heirs will be responsible for the estate tax.
The situation can be very problematic to handle because the estate tax can go very high. One thing which is very important to understand is that we all have to have to a very strong planning regarding our estate. A strong estate planning will help us in reducing the taxes along with leaving a remarkable property to the heirs. However, if you live in Hawaii then there are certain rules and laws, which you have to follow strictly. Hawaii is one of the states which still collects the estate tax under the laws above mentioned. The residents of Hawaii also are supposed to pay a local death tax as well. If we consider the facts and logistics of the previous years, then we will get to know that the residents of Hawaii are expected to pay the estate tax if the value of their property is $5,430,000 or above this. In addition to this, the living spouse can file for an estate tax return if the dead person has never used the estate tax exemption but these are rare cases.