Deborah Jenkins, from Forbes.com, paints a grim picture of what will likely happen in 2011. The estate tax is scheduled to return in 2011 and the estate tax exemption rate will be $1 million. Assets left to a charity or spouse is exempt from taxes. However, if both spouses pass together or if a widow or widower passes and the assets total more than $1 million, anything above $1 million can be taxed 55%.
A person’s taxable estate can include equity in the home, all money/retirement accounts, property and life insurance proceeds. One can see that it does not take long to reach $1 million. Estate planning techniques to avoid estate taxes are also being shrunk. It is essential to have a quality estate planning team comprising of a financial advisor, accountant, life insurance agent and estate planning attorney.
http://www.forbes.com/2010/04/18/estate-tax-sharp-bite-2011-personal-finance-grats-flps.html
That should not be the question. With gifting, you not only benefit yourself, you potentially save future generations from a heavy tax burden. In addition to a reduction in taxes, by reducing the size of your estate, you generally reduce the amount of probate costs and legal fees if an estate has to pass through probate.
Gifting is exactly what is sounds like: giving a gift to a spouse, a family member, a friend or even a charity. It is an estate planning tool that can used to reduce the total amount of an estate to avoid taxes and probate fees. Each person can give $13,000 a year to anyone they want to tax-free. The number of people who receive a tax-free gift of $13,000 is unlimited. Married couples can combine their amount to $26,000 a year.
Gifting is mainly used by people with large estates. However, anyone can leave a charitable gift at anytime and even include a final charitable gift in their will or trust. I always suggest to my clients to leave a gift to a charity… no matter the size. Even a small gift of 1% of their total estate left to the American Cancer Society, Big Brothers/Big Sisters, American Red Cross, Salvation Army or any number of other charities can go a long way in helping to prevent disease, mentor children and care for those in need. Consult with your estate planner to find the perfect gifting avenue for you and your family
Estate planning is all about creating a plan for your assets that will save time and money for your heirs. The idea is to take care of everything on the front end so there will be no problems on the back end. This article from The Chicago Tribune by Janet Kidd highlights some important reasons to design a proper plan no matter the size of your estate.
http://www.chicagotribune.com/business/yourmoney/chi-tc-biz-ym-journey-1025oct25,0,7459878.story
I have been working on a Will for a new client. She had a Will executed just a few years ago. That Will contained maybe 50 bequests of specific property, things like furniture, furnishings, and jewelry. She wants to change the Will because some of her beneficiaries have died, and because she wants to remove and add others. In order to accomplish this, we will have to draft an entirely new Will or a Codicil. Codicils are seperate documents that alter the terms of a Will. I never reccommend these because what happens if a person has executed one or more Codicils, but the Codicils are not found with the original Will? The Codicil is not worth anything and the terms of the original Will are followed if this happens.
Dispersing tangible property like this is much easier if it’s done within the context of a trust:
1. As part of the living trust process, we assign the client’s tangible personal property to the trust.
2. The trust includes a provision allowing the client to leave a written direction, telling where specific items will be distributed upon his death. The trust also contains a default provision for items not listed in the written direction.
3. Because the written direction is not part of the Will, it isn’t subject to the execution formalities of a Will. The above written direction can be changed as often as the client wishes, by the client (so no attorney involvement is needed) — it’s really just a note, left with the client’s other important papers.
Joanne Fanizza is an attorney licensed to practice law in New York, Florida and the District of Columbia, and maintains offices in Farmingdale, NY, and Fort Lauderdale, FL. Her practice concentrates on estate planning. She examines the inevitable problems that “fill-in-the-blank” documents can create.
Q. I understand that Congress is considering a so-called “flat” tax system. How would this work?
A. If Congress were to pass a “flat” tax, you’d simply pay a fixed percentage of your income, and you wouldn’t have to fill out any complicated forms, and there would be no loopholes for politically connected groups, and normal people would actually understand the tax laws, and giant talking broccoli stalks would come around and mow your lawn for free, because Congress is NOT going to pass a flat tax.
—Dave Barry
Have you ever had to take on the tedious process of probating an estate of a loved one? Do you know there are ways to avoid the costly attorney fees, heartache and months and even years that come along with probate court? Placing property inside a trust that would normally have to be probated is a great way to avoid probate court. There are a multitude of reasons families create trusts. Avoiding probate is one of the most popular. Trusts can be complicated, but I try to make them as simple to understand as I can. Additionally, make sure all of your accounts have the proper beneficiary designations. Most accounts can pass outside of probate directly to your beneficiary if you have them set up the correct way.
