Estate Planning: Federal Estate Tax Deductions - T. Rowe Price

Even if your estimated gross estate is more than the then-current federal estate tax exemption amount, you still may not owe federal estate taxes.* When calculating your taxable estate, several deductions are available that may reduce its size. These include:

This deduction includes the cost of your last illness, funeral, and burial as well as attorney's fees and any probate expenses.

As mentioned earlier, if you are married to a U.S. citizen you may leave an unlimited amount to your spouse without estate taxes.** However, leaving everything outright to your spouse may mean that your heirs pay more in estate taxes at your spouse's death than if you had made other arrangements like funding a bypass trust.

This deduction applies if you leave assets to a qualified charity outright by your will or trust or through a charitable remainder trust. These bequests can result in an estate tax deduction for either the amount of the bequest or the projected remainder amount in the trust that ultimately goes to charity. You can accomplish giving both to your beneficiaries and a charity by using a charitable remainder trust. Charitable trusts generally are irrevocable, meaning that you cannot change or dissolve them once created, and are subject to strict IRS rules. It is essential to consult a professional advisor before considering using a charitable trust.

This deduction includes the amount of your outstanding debts, including mortgages on property included in your gross estate.

*If you have a taxable estate in excess of the current exemption amount, you should talk to an estate planning attorney to discuss ways to minimize the potential impact of estate taxes.
**Special rules apply for non-U.S. citizens.