This includes everything in the probate estate plus beneficiary-designated assets such as IRAs and life insurance policies. The advantage of passing on an asset through beneficiary designation is that it doesn't have to go through the potentially costly and time-consuming probate process. When the IRS calculates the tax owed on an estate, it counts all the elements in the probate and taxable estate circles. The next largest circle includes assets held outside the estate in trusts. These assets, which aren't controlled by the individual, are not counted in the estate tax bill.
Estate taxes can be quite costly.
At that point, the tax is levied at a 37 percent rate. A presidential veto killed a congressional move to repeal the estate tax in 2000, and a future repeal isn't a political certainty. So, proper estate planning is crucial if you want a say in how your assets are ultimately distributed. An account into which you may make tax-deductible or nondeductible contributions that can later be withdrawn at retirement. Heirs may be able to extend the IRA withdrawals, allowing the balance to continue to grow tax-deferred.