The taxable estate includes the value of all property and assets owned at the time of death plus any gifts made in the three years prior to death. Allowable deductions from a decedent’s taxable estate include funeral expenses, debts the decedent owed at the time of death, costs of administering and settling the estate, and the marital deduction. The marital deduction encompasses the value of property that passes from an estate to a surviving spouse.
Any unified credit not used to eliminate gift tax can be used to eliminate or reduce estate tax. The maximum tax rate for the estate of a person who died in 2005 is 47 percent. The rate falls to 46 percent for the estate of someone who dies in 2006, and to 45 percent for someone who dies in 2007, 2008, or 2009.