Overview

Main Menu Name: Cash Need

Determines the cash requirements for a person upon the death of his or her spouse. It provides a cash flow analysis including the Adjusted Gross Estate and the Taxable Estate. It also provides the State Death Tax Credit and the Federal Estate Tax Payable.

The estate tax calculations take into account the changes in rates and credits provided by the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010, the American Taxpayer Relief Act of 2012, and the Tax Cuts & Jobs Act of 2017.

In this article:

• Background
• Getting Started
• Entering Data
• Results

Background

This calculation shows the amount of cash an estate's executor must be able to raise within nine months of the death of an estate owner. These include debts, funeral expenses, administration costs (including legal, accounting, and valuation fees), state and federal death taxes. These numbers do not, of course, include the cost of food, clothing, shelter, or college education expenses for family members.

You should compare the estate's assumed liquidity (cash to pay taxes) with the estate's cash needs. A shortfall indicates the need to purchase life insurance, arrange for the estate to borrow sufficient funds under reasonable terms to meet the cash needs, or attempt to reduce cash needs by repositioning assets and using one or more appropriate estate planning tools or techniques. Typically, a combination of these will be required.

Getting Started

Entering Data

1. Current Year:  Enter the year of death.
   
   
2. Sunset in 2026?: Indicate how future estate tax calculations will be handled.
   
   
3. Value of Gross Estate:  Enter the total value of the estate at the time of death. This is the amount before deductions.
   
   
4. Funeral & Admin. Expenses:  Enter the total amount of expenses incurred.
   
   
5. Debts & Taxes:  Enter the total amount of debts and taxes incurred due to the death of the decedent.
   
   
6. Other Losses:  Enter any other losses incurred by the deceased.
   
   
7. Adjusted Taxable Gifts:  Enter the taxable portion of post-1976 lifetime taxable transfers not already included in the Gross Estate.
   
   
8. Total Cash Bequests:  Enter the total amount of any cash bequests indicated in the deceased's estate.
   
   
9. Liquidity Presumed Available:  Enter the total value of all liquid assets at the time of death.
   
   
10. Foreign Death Taxes:  Enter any credit for foreign death taxes (if applicable).
    
    
11. Tax on Prior Transfers:  Enter the amount of credit for tax on prior transfers.
    
    
12. §2057 Deduction:  Enter the amount of the §2057 deduction. No deduction is allowed after 2003, when the deduction is repealed.
    
    
13. Marital Deduction:  Enter the amount of marital deduction. There is an unlimited deduction for gifts made between spouses.
    
    
14.  Charitable Deduction:  Enter the total amount of contributions made to charitable organizations that qualify for the charitable deduction.
    
    
15. Gift Taxes Paid or Payable on Post-1976 Gifts:  Enter the amount of gift taxes paid after 1976.
    
    
16. State Death Tax Payable:  Enter the amount of state inheritance taxes.
    
    
17. Override Computed Value:  Select the check box to override the value computed by the program.
    
    
18. Spousal Unused Exclusion:  Enter the amount of any "deceased spousal unused exclusion amount" to which the decedent/donor is entitled by reason of the death of a spouse after 2010 whose estate tax return did not use up the full unified credit exclusion amount. Click on the computer icon to the left of the entry field to calculate the maximum exclusion amount for the year of the spouse's death, taking into account the inflation rate entered for the exclusion.
    
    
19. Inflation Rate for Exclusion:  Enter the rate of inflation to be applied to increase the unified credit exclusion amount in future years.

Results

The Summary Tab displays all of the figures that are needed to arrive at the Total Cash Requirements for a person after the death of their spouse. The calculation results display the Adjusted Gross Estate (the amount after deductions have been taken), the Taxable Estate, as well as the Tentative Tax Base. Also shown is a comparison of the amounts of Federal Estate Tax Payable before and after any Tax Credits. These results are used to then arrive at the Total Cash Requirements.

Details of the calculations used by the program for the Determination of Cash Requirements of Year 2023 and Summary of Cash Needs can be viewed when you click the Details tab in the lower portion of your screen. This detailed calculation explanation is based on the inputs you have entered.