Estate Tax
Will my estate have to pay estate taxes when I die?Answer: "It's hard to say." Why? "Because the law is in a state of flux."
Currently, an estate is exempt from estate tax up to $2,000,000.
As the law now stands, in 2009, the exemption amount will go up to $3,500,000. In 2010, there will be no estate tax at all.
So for tax planning purposes, 2010 is the optimal year to die!!
But, alas, in 2011, the estate tax exemption amount is scheduled to go back to $1,000,000.
There have been unsuccessful attempts to amend the current law in various ways. And, it is beyond my ability to predict what will happen in the future to estate taxation. So, all we have to go on presently is the current law.
Given that state of affairs, perhaps the most reasonable course is to assume your estate will be exempt up to $1,000,000 and anything above that will be subject to a (rather draconian) estate tax rate of 45%.
And that is just the federal estate tax. You may also have a state estate or death tax and possibly even an additional "generation-skipping tax."
So, a threshold question to ask yourself is whether you will have assets worth $1,000,000 or more at death. To find out what assets are included in estate read Assets Subject to Estate Tax.
If so, you should give serious thought to how you could arrange your affairs in order to ensure the smallest estate tax bite possible.
Can a living trust be used to save estate taxes?
A living trust (credit shelter trust version) is one vehicle that can be used to limit the tax your estate might have to pay. There are other ways as well. To find out more, read Credit Shelter Trust.
From Estate Tax to Living Trust
|
