An 'estate' refers to all the property a person possesses. Such property includes actual possessions, such as houses and other buildings; financial obligations; and the right to redirect the ownership of property in the event of the proprietor's death. An estate becomes taxable upon the death of the owner, and must usually be paid before the property is distributed to any beneficiaries. The first $675,000 (six hundred and seventy-five thousand dollars) of an estate is not taxable, but when the gross estate becomes worth more than the tax-free allowance, an estate tax return must be filed. The net estate includes the gross estate less any allowable deductions, like funeral expenses, debts, or property given to a spouse. Estate taxes are due nine months after the death of the owner, and penalties for late payments or failure to pay are applied. The Internal Revenue Service, or IRS (I-R-S), may grant an extension for special circumstances. To minimize the estate's tax liability, estate-planning strategies can take advantage of credits or other forms of tax relief. Credits can be claimed for state or foreign death taxes and prior transfers, or the Unified Credit can be used to reduce the amount of taxes owed. Other methods of reducing estate taxes include credit trusts, private annuities, irrevocable life-insurance trusts, gifting, family corporations or limited partnerships, and selling certain assets to children. For more information about estate taxes and effective planning strategies, consult a tax professional.
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