Taxes are due in a variety of circumstances. Property owners pay taxes based on the value of their real estate holdings. Businesses and individuals have to pay taxes on their income. The estate of someone who recently died may even be subject to taxes in some cases.
Estate taxes are the responsibility of the estate of a deceased individual. The personal representative administering the estate has to pay estate taxes that can potentially consume as much as 40% of the estate’s total value. Those engaged in estate planning generally want to avoid taxes and other liabilities that can diminish their legacy. When do people have to plan to avoid estate taxes?
Federal taxes apply to large estates
Alabama, like most other states in the nation, does not currently assess an estate tax. Regardless of how much property an individual owns, their estate does not have to pay any taxes to the Alabama state governments after they die.
However, particularly large estates may need to cover federal estate taxes. The threshold for estate taxes changes every year. For individuals who die in 2025, the threshold for estate taxes is $13.99 million.
The federal estate tax rate is progressive. The more the value of the estate exceeds the current threshold, the higher the tax rate. Testators creating or updating their estate plans may need to make gifts to beneficiaries before they die, transfer property to a trust or take on co-owners as a means of limiting the value of the estate and the taxes that may be due.
Having help with identifying potential challenges can make it easier to create the best estate plans possible. Those who own businesses or other high-value resources plan in advance to minimize their posthumous tax liability.