One common goal of estate planning, aside from deciding who will receive your estate assets when you die, is tax avoidance. Failing to consider the impact of gift and estate taxes on your estate plan can be catastrophic considering the fact that estates are taxed at a 40 percent tax rate. For anyone with a moderate to large estate a significant portion of the estate can be lost to taxes without careful planning. One estate planning tool that is frequently overlooked is the annual gift tax … [Read more...]
Can You Gift Money Each Year to Your Children Tax-Free?
One common goal of estate planning, aside from deciding who will receive your estate assets when you die, is tax avoidance. Failing to consider the impact of gift and estate taxes on your estate plan can be catastrophic considering the fact that estates are taxed at a 40 percent tax rate. For anyone with a moderate to large estate a significant portion of the estate can be lost to taxes without careful planning. One estate planning tool that is frequently overlooked is the annual gift tax … [Read more...]
Don’t Get Cute With the IRS
People often try to get a little bit too cute in ways to avoid taxes. This is true whether they are paying taxes now or whether they are trying to avoid taxes on their estates after they die. Unfortunately, the IRS does not give bonus points for looks. Trying to be cute, will result in trouble. No one wants trouble with the IRS, so talk to your estate attorney about making sure you do things right. One recent example of not doing things the right way is what happened to former Yankees pitcher … [Read more...]
Amending Your Parents’ Estate Plans
Many wealthy people wish they could amend their parents' estate plans after their parents pass away. Few know that they can. What often happens is that a wealthy person's parents will leave a large estate to someone who does not need it. The estate will be subject to the estate tax. The wealthy person who inherited the estate will then just keep the assets and leave them to his or her own children eventually. The same assets will be subject to the estate tax again. The way around this double … [Read more...]
New IRS Regulations on Charitable Bequests
New IRS regulations make leaving money to charity in a Will or Trust a little bit more complicated. The Will or Trust now needs to detail the source of the money that is to be used for charitable purposes. To qualify as non-taxable, that income source must have an independent economic effect, which basically means that the contribution cannot merely be to avoid paying income tax on the money. The reason for the new rule is because of Charitable Lead Trusts. These are instruments that people … [Read more...]
The Estate Tax Again
In their first Presidential debate, Mitt Romney and President Obama spent a lot of time talking about taxes. However, neither one of them mentioned anything about the estate tax and the looming problem with the exemption limit. That was disappointing as it is a big, hidden issue for a lot of middle class families. Moderate senators, John McCain and Ben Nelson have both stated that they do not expect any fix to the estate tax issue this year because the political parties are simply too far … [Read more...]
Changes to the Estate Tax
Estate planning attorneys everywhere are trying to let everyone know that the lifetime estate tax exemption of $5.12 million is scheduled to decrease at the beginning of 2013. Under normal circumstances, attorneys would be urging you to contact your congressmen and congresswomen to ask them to vote to keep the current limit. You can try that. However, the reality is that in the current political climate it is unlikely to have any affect, especially in an election year. This time, the wisest … [Read more...]
Romney’s Estate and Investment Tax Proposals
We have talked previously about the uncertainty concerning the estate tax at the end of 2012. It gets even more uncertain because it is a Presidential election year and the two candidates have different proposals on estate and investment taxes. Today, we will look at the Republican candidate's proposals. The biggest change under Romney's tax plan is the complete elimination of the estate tax. He also proposes dramatic changes to investment tax rates. Under the Romney plan, anyone with an income … [Read more...]
Obama’s Estate and Investment Tax Proposals
In our last post, we discussed what Mitt Romney proposes to do about the estate tax and taxes on investments if he is elected President. Of course, President Obama also has his own proposals and they include some changes from the current laws, so we should look at what he proposes to change. For the estate tax, President Obama proposes a return to the 2009 rules. These set the estate tax exemption at $3.5 million and the estate tax rate at 45%. This is an increase in the estate tax from 2012 … [Read more...]
Your Federal Income Tax Duties as a Personal Representative: Part 3 of 3
As you know from the previous blog, a personal representative may also be responsible for filing a decedent’s final individual income tax return or Internal Revenue Service (IRS) Form 1040. You will also have to make sure you file an IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. As the personal representative appointed to administer an estate, you must also file a federal income tax return on the estate’s behalf. The estate’s gross income includes everything … [Read more...]
