What You Should Know About Death Taxes

What is an Estate Tax?

An estate tax, sometimes referred to as a death tax, is a tax on your right to transfer property at your death.. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items at the time of death, not necessarily what you paid for them or what their values were when you acquired them, is subject to the tax. The total of these items is known as your ‘Gross Estate,’ which is subject to federal estate taxes, commonly known as death taxes. The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets (such as life insurance).  The estate tax is paid by the Decedent’s estate not by the beneficiaries or heirs.  However, some states also impose an “inheritance tax” that is the responsibility of the persons who receive distributions from an estate.

Does Nevada Have an Estate or Inheritance Tax?

Only 17 states and the District of Columbia currently levy an inheritance tax. Fortunately, Nevada does not impose an inheritance tax. While Nevada does not impose death taxes or estate taxes upon a decedent’s property, the gross estate is subject to a federal estate tax.

How is the Taxable Estate Calculated?

Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your “Taxable Estate.” These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses, and qualified charities. Certain deductions are allowed when calculating the taxable estate, reducing the impact of death taxes on the estate’s value.

Is There a Credit in Addition to the Spousal and Charitable Deductions? 

The Internal Revenue Code provides for a credit (known as the “Exemption Amount”) upon the taxable estate to determine if an estate tax is due.  The Tax Cuts and Jobs Act of 2017 has had a profound impact on many people who may have a taxable estate in the future. This law more than doubled the maximum that families can give their beneficiaries — either during their lifetime or as part of their estate — without incurring federal gift or estate taxes. The Tax Cuts and Jobs Act has allowed families to shield more of their estate from death taxes through higher exemption limits. In addition, the amount is indexed for inflation. As a result, for 2024, a single taxpayer can claim a federal estate and lifetime gift tax exemption of $13.61 million. Couples making joint gifts can double that amount.  The exemption is permitted after determining the taxable estate as a result of deductions.  However, there’s a catch – the legislation had a “sunset provision” and unless Congress permanently enacts the exemption increases, it will revert back to 2017 levels of approximately $7 million.  

What Happens to My Unused Credit? 

Beginning January 1, 2011, estates of decedents survived by a spouse may elect to pass any of the decedent’s unused exemption to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse. Note that simplified valuation provisions apply for those estates without a filing requirement absent the portability election.
The probate attorney at Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.