Broker Check

How is an Estate Depleted?

April 14, 2022

Calculating Estate Taxes for Your Benefit

Coming up with effective plans to maximize what you’ll leave behind involves understanding where your assets tend to go, whether you want them to or not. Taxes are a reality of our government system, and in the US, many are levied against our incomes while we live, and against our estates after we’re gone.

Order of Expenses

After your death, the first charges you might have expected to come out of your estate are any end-of-life medical expenses that remain unpaid, as well as your funeral and burial costs. There will also be the burden of any unpaid debts, which should come directly out of what you have left.

Next, there tend to be probate expenses. These are the costs of orderly administration of your estate as indicated in your will, including attorney’s fees, executor’s fees, appraiser’s fees, and court fees.

Lastly, there will be estate or inheritance taxes, as dictated by both state and federal law. If your estate is particularly large, taxes at the federal level can be the most burdensome. In 2022, estates are subject to a mind-blowing 40% fee on any assets exceeding $12.06 million.

Calculating Federal Estate Tax

To understand how your estate will deplete mathematically, start with a Gross Estate Valuation. This includes any property held in your name or in your living trust, as well as portions of any properties you hold jointly with others. In addition to cars you own, homes you bought and all the items in them, any account or policy that will pass on or pay out is part of your estate, such as any Life Insurance or Retirement Plans (like IRAs and Pensions), or Annuities. Although “death benefits” and certain trust amounts may be protected from depletion, the total of all these assets will paint a full picture of all that will outlast you.

Now, you’ll need to subtract from this total your medical, funeral, and probate expenses, as well as your debts and any state estate or inheritance taxes that will be levied. This will leave the value of your Adjusted Gross Estate, from which you should subtract any marital or charitable deductions you are entitled to.

Your remaining Taxable Estate, plus adjustments for any taxable gifts, will indicate your Federal Estate Tax Base. From this amount, subtract $12.06 million (if you were so lucky), and take 40% of that to get your Tentative Federal Estate Tax amount.

From this, you may be able to subtract applicable tax credits, including any unused spousal credits. What remains will be due as your Net Federal Estate Tax. This, on top of end-of-life, burial, and probate costs, outstanding debts and state taxes, will be the ultimate expense that depletes your estate.

Being aware of all these costs is a great first step in deciding what estate plans you will make.


Registered Representative. Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative. Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. New South Wealth Management and Cambridge are not affiliated.