What is the death tax? Does it even exist? Will the federal government use it to wipe out your savings? Take this quiz to find out how much you know about this often-misunderstood part of the tax code.
Does a death tax actually exist?
- technically no, but the term refers to a real tax
When were estate taxes first used in the U.S.?
- in the late 1700s
- during the Civil War
- after World War II
What's the difference between estate taxes and so-called gift taxes?
- There is no difference.
- Estate taxes are levied after the granter's death, whereas gift taxes apply to wealth transfers during the granter's lifetime.
- Estate taxes are the only ones referred to as death taxes.
How do you know if your estate is large enough to qualify for estate taxes when you die?
- A tax professional can help you appraise the value of your estate and determine if it exceeds the federal exemption amount.
- The federal government taxes all estates, no matter how small.
- You can't determine this; it can only be calculated after you die.
Will the death tax wipe out your estate if you die in 2011?
- Yes; the 2011 estate tax rate would wipe out a large portion of your assets.
- Not if you plan well; the maximum estate tax rate in 2011 is 35 percent.
- The 2011 tax rate of 55 percent could put a major dent in the size of your estate.
Does the death tax apply equally in every state?
- No; federal estate taxes are nationwide, but state estate taxes vary by state.
- No; states have control over estate taxes, and the federal estate taxes vary by state, too.
- All estate tax rates are set by the federal government; the states have nothing to do with them.
Can you do anything to manage the estate taxes your heirs will pay when you die?
- This one's out of your hands; wish your heirs luck, and hope for the best!
- You should prepare tax paperwork before your death, so all your heirs have to do is file.
- There are many steps you can take during your lifetime to minimize the tax burden on your heirs.
Does the estate tax apply to nonmonetary items (cars, boats, etc.)?
- only if the items are very rare and valuable