$625,000 Exemption Equivalent: Technically, the estate tax is imposed on all estates, but each taxpayer has a huge tax credit which corresponds to the tax on an estate of $625,000 (as of 1998). The practical result is that there is no estate tax if a deceased person leaves less than $625,000 worth of property. Under the "Taxpayer Relief Act of 1997," the exempt amount will increase by another $25,000 in 1999, 2000, and 2002 (followed by larger increases in 2004, 2005 and 2006, unless budget pressures delay those increases); see "Estate and Gift Tax Changes in the 1997 Budget Act" for more information.
No Estate Tax for Bequests to Spouse or Charity: There is no estate tax on any property left to a surviving spouse or to a qualified charity. Wealthy married persons can leave $600,000 to their children and the balance of their estates to a surviving spouse (or charity), completely avoiding any estate taxes.
Property left to a surviving spouse will be subject to estate taxes at the time of the survivor's death, if it is not left to charity (or to a new surviving spouse).
Forbes magazine wrote in October 1993 that Warren Buffett was then the richest man in America, with more than $8 billion in assets. According to Forbes, Buffett and his wife plan to leave their entire estate to private charitable foundations after they die -- avoiding $4.4 billion in estate taxes.
| Value of Estate at Death | Estate Tax Owed |
| $625,000 | $0 |
| $750,000 | $46,250 |
| $1 million | $143,750 |
| $1.5 million | $353,750 |
| $2 million | $578,750 |
| $3 million | $1,073,750 |
| $5 million | $2,173,750 |
Tax Rates: The estate tax is computed based upon the total value of all property transferred due to the deceased person's death (excluding bequests to a surviving spouse or to charity). Usually, the value for estate tax purposes will be larger than the "probate estate," which usually does not include life insurance, retirement accounts, or joint tenancy property.
For decedents dying in 1998, the estate tax starts at a marginal rate of 37% on amounts above $625,000, rising gradually to 55% for estates of $3 million or more. A 5% tax surcharge applies to estates from $10,000,000 up to $21,225,000. This marginal 60% bracket "phases out" the "unified credit" and lower tax brackets, so that a full 55% tax is collected on estates above $21 million.