9781601386977 by Unknown

Author:Unknown
Language: eng
Format: epub
Published: 2010-05-20T13:40:02+00:00

150 The Complete Guide to Planning Your Estate In Washington Seattle, Washington

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Chapter 8

Taxes: Estate Tax and Other Taxes

One of the largest, most complex areas of estate planning is the tax involved with it. Estate tax is an important part of planning your estate because it will take a large chunk of money from what you leave to your heirs. There are several types of taxes that could affect your estate, depending on your circumstances. These include:

• Federal estate tax

• State estate tax

• Inheritance tax

• Gift tax

As part of the planning for your estate, you need to take into consideration each of these types and make changes or allotments to your estate to ac-commodate them if they apply.

Anyone who is living in the United States or is a U.S. citizen is required to pay federal estate taxes. All your property in the United States is taxable.

Yet there are some strange laws in place to determine how much you need aPEstateinWa.indb 151

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152 The Complete Guide to Planning Your Estate In Washington to pay. In the last several years, Congress has passed new laws that define this information. As of publication, here is what you need to know:

• For a death that occurred in 2007 or 2008, a personal exemption of $2 million applied at the highest death estate tax rate of 45 percent.

• In 2009, the amount of personal exemption rose to $3.5 million at 45 percent.

• In 2010, there currently is no estate tax, as it is repealed.

• In 2011, it comes back with an amount of personal exemption at $1 million. The estate tax rate is 55 percent in 2011.

The state of the law is thus uncertain. There are political as well as eco-nomic reasons for the use of this tax and, therefore, there is no way to know which way it will go.

Most estate planners and tax professionals will tell you to plan your estate the best that you can through 2013 for federal estate taxes. As changes in the law occur, you will need to revisit your estate planning.

The point is to understand and plan for these taxes. Let us take a closer look at some of points you need to fully understand.

Federal Estate Tax Exemptions

For many people, there is no need to worry about this tax because the value of their estate is not large enough to be affected. There are several exemptions that you can take into consideration for your estate plan. Here is a breakdown of them:

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Chapter 8: Taxes: Estate Tax and other Taxes 153

Personal exemption

Depending on the year of death and the whim of Congress, as noted above, the personal exemption will apply from $1 to $3.5 million. One important note is that if you leave gifts that are taxable during your lifetime, this reduces your exemption amount.

Marital deduction

Another deduction for which you may qualify is the marital deduction. This means that all property you leave to your spouse, if he or she is a U.S. citizen, is exempt from taxes.

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