A transfer tax is imposed on all transfers of property for less than fair market value made during life and at death. The net effect of this rule is to tax your estate at a higher marginal rate. This is why the estate and gift tax system is considered a unified system. Certain transfers to your spouse and charities do not count against this exclusion. A graduated rate structure from 37 percent to 55 percent applies to amounts greater than the applicable exclusion amount.
Many people mistakenly believe that only the very wealthy are subject to estate tax.
However, a relatively modest accumulation of assets, sizable pension plan distributions, or the value of life insurance proceeds could cause a seemingly small estate to be subject to estate tax. Failure to utilize available estate planning techniques could prove costly. An unlimited amount of property may be transferred to your spouse during his or her lifetime or upon death, if your spouse is given unconditional ownership of the property and the spouse is a U.S. citizen. Called the unlimited marital deduction, this provision allows for the transfer of any or all of your property to your spouse, free of gift or estate tax. However, the savings may be short term, as your spouse's estate will be subject to tax on the full amount of both your holdings.