In America, federal estate tax (called inheritance tax or death duty in some countries) is applied to the transfer of property when a person dies. If the deceased was a citizen or resident of America at the time of his death, the value of his entire estate is subject to estate tax, irrespective of where it’s located. A non-resident pays estate tax only on the value of property located in America at the time of his death. Note that lifetime transfers and transfers made at the time of death are combined for estate tax purposes.
Transfers between spouses are tax exempt. For all other transfers, a United States Estate Tax Return (form 706) must be filed if the gross US estate of a non-resident is over $60,000 or if the gross estate of a US citizen exceeds a certain value (known as the ‘exclusion amount’) at the time of death. The exclusion amount is set to be increased annually until 2006, as shown below. The ‘unified credit’ is the amount available to be offset both estate and gift taxes. Gift and estate tax rates are progressive and are calculated according to a ‘unified rate schedule’ (from 1 8 to 55 per cent).
An estate tax return should be filed nine months after death, unless an extension has been granted.
A federal gift tax is imposed on the gratuitous transfer of property (whether tangible or intangible) above a certain value, and the person making the gift must usually pay the tax. You can give away $10,000 to any individual during any calendar year without incurring gift tax, and a couple can agree to treat gifts to individuals as joint gifts and therefore exclude up to $20,000 per year.
There’s also an unlimited exclusion from gift tax for medical expenses and school tuition fees. A person who isn’t a citizen or resident is subject to gift tax only on gifts of property situated in America. US citizens and residents who make taxable gifts during the calendar year are required to file a United States Gift Tax Return (form 709) by 1 5th April of the following year. Find More information about estate and gift tax >>
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