The first piece of information that you must ascertain when you’re planning your estate is whether or not it will be subject to the federal estate tax. This would seem like a matter of simply inventorying your assets and checking the resultant figure alongside the estate tax exclusion amount. What makes this less simple than it sounds is the fact that the estate tax exclusion is always being changed; at this moment it stands at $5 million, and the maximum rate of the tax is 35%. So at the present time your estate is not exposed to the federal estate tax if it is worth less than $5 million.
However, if you don’t plan on passing away anytime soon you may want to take pause before coming to the conclusion that the estate tax does not apply to you. The estate tax parameters were changed due to provisions that are contained in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This measure is going to expire at the end of 2012, and if it is allowed to do so without any new legislation being passed to take its place the estate tax exclusion is going to be just $1 million and the maximum rate of the tax will come in at 55%.
It is kind of hard to wrap your head around a tax that is poised to take more than a third of the taxable portion of your legacy, but when it gets up to more than half it almost seems surreal. The good news is that there are strategies that can be employed that will reduce your estate tax liability, but the correct course of action varies depending on the specific nature of your holdings. The best way to proceed if you are concerned about estate tax exposure is to arrange for a consultation with an experienced estate planning attorney who will carefully examine your unique situation and make the appropriate recommendations.
- Comprehensive Latter Life Planning - October 21, 2020
- Who Inherits from a Beneficiary Who Died? - October 14, 2020
- What Is a HIPAA Release? - October 6, 2020
