A decedent's estate can owe nothing and still be required to file. That gap, between a taxable estate and a filing obligation, drives a large share of estate questions.
When someone dies, the federal estate tax asks whether the wealth they leave behind is large enough to tax. It applies to the transfer of the taxable estate of every citizen or resident decedent (the person who died). It is a tax on the transfer itself, not on the people who inherit, so the estate pays it.
The computation always runs in the same order, from the gross estate down to the net estate tax, and each step feeds the next one:
Two terms are easy to confuse here. The basic exclusion amount is the value of property a person can pass on before any estate or gift tax is owed. The unified credit is the tax on the basic exclusion amount, not the exclusion itself, so it is a smaller number that you subtract from the tentative tax.
Common mistakes
- Treating $13,990,000 as the credit. The $13,990,000 is the exclusion, measured in property value. The unified credit is $5,541,800, the tax on $13,990,000, measured in tax dollars. Subtracting $13,990,000 from a tentative tax figure mixes the two and produces nonsense.
- Splitting nonspousal jointly held property 50/50. The 50% rule applies only to spouses. When the co-owner is anyone else, a nonspousal joint tenancy includes 100% of the value minus the survivor's proven contribution.
- Excluding life insurance because the beneficiary is a person. Naming an individual as beneficiary doesn't keep the proceeds out of the gross estate. Only lacking every incident of ownership does that, and only if the transfer of the policy happened more than three years before death.
Bottom line
- 2025 basic exclusion $13,990,000; top estate tax rate 40%; unified credit $5,541,800
- Form 706 is due 9 months after death; Form 4768 extends filing 6 months but never the payment
- Spousal jointly held property is 50/50 when the surviving spouse is a US citizen; nonspousal is 100% less the survivor's proven contribution
- Life insurance is in the gross estate if payable to the estate, if any incident of ownership was held, or if transferred within 3 years
Exam shortcut
Read the stem for who the co-owner is before touching a joint-property number. "Spouse" means 50% when the surviving spouse is a US citizen. Any other co-owner means you hunt for consideration furnished, and the distractor is always the neat 50%.
The full lesson (about 4,015 words, 27 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 1
- 2
- 3
Browse all free EA Part 1 lessons or jump into free EA Part 1 practice questions.