Showing posts with label lifetime exclusion amount. Show all posts
Showing posts with label lifetime exclusion amount. Show all posts
Wednesday, October 14, 2009
2. Saves Money - continued
Yesterday, we were discussing how Max and Margaret could save on their Federal Estate Tax through effective estate planning.
Since we do not know who might die first, both Max and Margaret would need to have a specific trust set up to shelter or preserve the applicable tax credit of the lifetime exclusion. The lifetime exclusion is the amount of Max's or Margaret's estate that is not subject to federal estate tax. In 2009, that amount is 3.5 million dollars.
The tax savings of this amount passes to the three sons of Max and Margaret upon the death of the second spouse, ie assume Margaret in this scenario. The tax credit of Margaret will also pass tax free to the sons. As a result, 7 million dollars would effectively be saved from taxes through the single, simple act of estate planning.
Contact us with your questions at www.ythlaw.com or leave your comments here.
Wednesday, June 3, 2009
Rethinking Your Estate Plan - Question 1. Part A.
I read a very good article in Money Magazine entitled:
Rethinking your estate plan
A smaller net worth and bigger worries about your kids' finances (not to mention uncertainty about taxes) have major implications for your estate plan.
In the article the author posed 5 questions that one should ask when rethinking their current estate plan. These same questions should be posed if you have not done your estate plan. I will cover each question over the next 5 days.
1. Part A. SHOULD I GIVE NOW OR SHOULD I GIVE LATER?
"Estate planners used to advise relatively affluent people to give some money or other assets to their intended heirs while everyone was still alive. The reason: taxes. Giving now reduces the size of your taxable estate, beefing up the total amount that goes into your heirs' pockets. (You can give up to $13,000 per recipient per year tax-free, or $26,000 for a couple.)
But because the federal estate-tax exclusion rose to $3.5 million this year - up from $2 million in 2008 - and could be extended for at least another year, taxes probably aren't a pressing concern for you right now. Instead, you should be thinking about whether your diminished assets will be enough to take care of you."
Obviously now, in this economy, you want to make sure you have enough money for you before you start giving it away. So, planning becomes even more essential. Leave a comment or contact us at http://www.ythlaw.com/
Rethinking your estate plan
A smaller net worth and bigger worries about your kids' finances (not to mention uncertainty about taxes) have major implications for your estate plan.
In the article the author posed 5 questions that one should ask when rethinking their current estate plan. These same questions should be posed if you have not done your estate plan. I will cover each question over the next 5 days.
1. Part A. SHOULD I GIVE NOW OR SHOULD I GIVE LATER?
"Estate planners used to advise relatively affluent people to give some money or other assets to their intended heirs while everyone was still alive. The reason: taxes. Giving now reduces the size of your taxable estate, beefing up the total amount that goes into your heirs' pockets. (You can give up to $13,000 per recipient per year tax-free, or $26,000 for a couple.)
But because the federal estate-tax exclusion rose to $3.5 million this year - up from $2 million in 2008 - and could be extended for at least another year, taxes probably aren't a pressing concern for you right now. Instead, you should be thinking about whether your diminished assets will be enough to take care of you."
Obviously now, in this economy, you want to make sure you have enough money for you before you start giving it away. So, planning becomes even more essential. Leave a comment or contact us at http://www.ythlaw.com/
Monday, May 18, 2009
How can I avoid Federal Estate Tax?
Question:
My husband died unexpectantly and without a will. The estate is worth in excess of 3.5 million dollars. My husband had children from a prior marriage and we had children together. Can I avoid Federal Estate taxes? How can I best provide for all of his children?
Answer:
Yes, you can avoid federal inheritance tax because of the unlimited marital deduction applied to estate assets that pass from your deceased husband to you. However, since your husband died without a will, there was no planning in place to take advantage of his lifetime exclusion amount or his credit against potential future taxes. Further, there will be taxes on the monies which go directly to the children.
WHY, you might ask? When someone dies without a will, the state determines who inherits what assets. In your case, Pennsylvania provides that ½ of the estate would pass to you and the other ½ would pass equally to all of his children. However, this only applies to probate assets – assets that were titled in your husband’s name only. The intestate (to die without a will) laws do not apply to jointly held property and assets providing for designated beneficiaries.
Assuming that most of the estate was held jointly or provided you as the designated beneficiary, the following estate planning strategies are available to provide for the children while minimizing the Federal estate tax:
Gifting: $13000 can be given annually to each child tax free. Such funds could be placed in a trust for the benefit of the children.
529 College Saving Plans: $6,000 (representing 5 years of annual gifts of $13000) is permitted for each child.
Family Limited Partnership: is another gifting vehicle.
Irrevocable Life Insurance Trust: takes life insurance proceeds out of your estate.
Have your questions answered by entering a comment or submitting an inquiry through http://www.ythlaw.com/.
My husband died unexpectantly and without a will. The estate is worth in excess of 3.5 million dollars. My husband had children from a prior marriage and we had children together. Can I avoid Federal Estate taxes? How can I best provide for all of his children?
Answer:
Yes, you can avoid federal inheritance tax because of the unlimited marital deduction applied to estate assets that pass from your deceased husband to you. However, since your husband died without a will, there was no planning in place to take advantage of his lifetime exclusion amount or his credit against potential future taxes. Further, there will be taxes on the monies which go directly to the children.
WHY, you might ask? When someone dies without a will, the state determines who inherits what assets. In your case, Pennsylvania provides that ½ of the estate would pass to you and the other ½ would pass equally to all of his children. However, this only applies to probate assets – assets that were titled in your husband’s name only. The intestate (to die without a will) laws do not apply to jointly held property and assets providing for designated beneficiaries.
Assuming that most of the estate was held jointly or provided you as the designated beneficiary, the following estate planning strategies are available to provide for the children while minimizing the Federal estate tax:
Gifting: $13000 can be given annually to each child tax free. Such funds could be placed in a trust for the benefit of the children.
529 College Saving Plans: $6,000 (representing 5 years of annual gifts of $13000) is permitted for each child.
Family Limited Partnership: is another gifting vehicle.
Irrevocable Life Insurance Trust: takes life insurance proceeds out of your estate.
Have your questions answered by entering a comment or submitting an inquiry through http://www.ythlaw.com/.
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