I want to leave a legacy, but
I'm worried about taxes.
We know that taxes are a major concern for our clients during the estate planning phase. Our attorneys will walk you through all of your options to help you navigate the complex topic of estate taxes.
What is an estate tax?
According to the IRS, the federal estate tax is a tax on your right to transfer property when you pass away. The amount your gross estate had to total before the estate tax was triggered up until recently was less than one million dollars, so many Americans who had worked their whole lives to accumulate some wealth would instantly lose much of it when they pass away and are unable to transfer it to their children.
Fortunately, in 2012, the unified lifetime gift and estate tax exemption was increased to five million dollars and the tax rate continues to be at forty percent. The exemption number has also been adjusted for inflation for the coming years after 2012. So, unless you and your spouse have a gross estate of over $11,000,000 when you both pass away, at this point in time, estate tax is no longer a grave concern.
However, because of these and other legislative changes, your estate plan that was completed years ago might need some major revisions, and without them, your beneficiaries could be severely limited. With the right legal guidance from your estate planning attorney, you can avoid or minimize federal estate taxes and adjust your estate plan to current legislation, allowing you to leave more assets to your loved ones and other beneficiaries after your death.
What is Portability?
The American Tax Relief Act of 2012 (ATRA) was enacted into law in January of 2013. The ATRA permanently implemented an element from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 called “portability.” Essentially, “portability” means that the spouse of the deceased can inherit the unused estate tax exemption and can then use it for gift or estate tax purposes.
While the concept of “portability” seems simple, there are a lot of details that need to be taken care of in a timely manner to take advantage of this new law. Be sure to discuss your options with your estate planning attorney while going through the estate planning process to ensure that you and your spouse do everything that needs to be done to qualify for the advantage of “portability.”
What else should I know?
You may be able to take advantage of salary reduction contributions by using a tax-favored employee benefits account. You should also consider using gifting strategies to transfer assets to your children or your favorite charity to reduce your taxes. Gifting strategies and salary reduction contributions should be discussed with your estate planning attorney during your free consultation.
Can you work with my tax professional?
Absolutely. We've found that the best planning occurs when respective experts are all around the same proverbial table. At your direction, we're happy to include your tax professional(s) to increase the holistic effectiveness of your plan.