A gross estate consists of everything someone owns at the time of death, ranging from real estate to investment accounts. The gross estate is calculated to determine the tax liability for the estate, and it is also of interest to attorneys and accountants who specialize in handling estates, as their fees are typically based on a percentage of the gross estate. Because the law surrounding estates is extremely complicated in most regions of the world, people are usually encouraged to consult lawyers and accounting professionals in the wake of a death to ensure that the estate is handled properly.
When the gross estate is calculated, it includes everything which someone has an interest in, including jointly owned assets such as dually held bank accounts and other assets such as personal property, real estate, shares in a business, and so forth. The gross estate does not include deductions for debts, liabilities, and taxes, much like gross annual income is arrived at by adding together someone's total income for the year, and then adjusted to arrive at net income, a number which excludes expenses such as taxes.
It is easier to calculate a gross estate when a decedent has left detailed information about all of his or her interests and holdings. This information is usually outlined in a will, with the decedent directing various parts of the estate to different people. If this information is not available because someone has died without a will or his or her will was not regularly updated, determining the value of the gross estate can be a complex challenge which may take weeks or months of investigation to uncover all interests.
Once the amount of the gross estate is confirmed, it is possible to figure out the tax liability on the estate, and to start determining how much money should be awarded to creditors. Creditors are usually ranked, with certain types of creditors receiving payments before others, and once all of the debts and other liabilities are satisfied, heirs are left with the net estate, the section of the estate left after all expenses have been accounted for.
Tax liability on a gross estate varies, depending on the size of the estate and the nation. Most tax codes contain a number of tax exemptions which reduce the tax burden for inheritors. Because the laws are quite variable and they are frequently changed, it is a good idea to work with an experienced accountant who keeps up with the tax code to avoid over or underpaying taxes.
