Federal estate tax is imposed on a decedent’s assets at the time of death. The total of these assets is called the “gross estate” and may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. The value of the property included in your estate for tax purposes is the fair market value of each asset at the time of death.

Certain deductions are then allowed to arrive at the decedent’s “taxable estate.” These deductions may include mortgages, debts, estate administration expenses, and property that passes to a surviving spouse. The value of taxable lifetime gifts is then added to this number. If the value of the decedent’s taxable estate is less than the federal exclusion at time of death, no federal estate taxes will be owed. For 2009, the federal exclusion was $5m, so only taxable estates exceeding this amount will have to pay estate taxes. In 2010 the federal exclusion was unlimited, which is to say, the estate tax did not exist.