FEDERAL
ESTATE TAX EXEMPTIONS PLANNING LAW INFORMATION TIPS ADVICE SIMPLE FIRM BASICS PERSONAL ACCOUNT SMART STRATEGY HOME PRACTICAL IDEAS EDUCATION
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Learn
to minimize the estate tax.
HOW TO MINIMIZE
YOUR ESTATE TAX
The saying goes that
there are only two sure things in life – death and taxes.
Combine these two ‘sure’
things and you get estate tax! But, the beneficiaries of
your estate do have a ‘get out of jail free’ card – better
known as estate tax exemptions – and here they are:
THE ESTATE
TAX EXEMPTIONS
A Personal Exemption
A personal exemption
of up to $1.5 million is available. However, to be able
to tax advantage of this personal exemption the ‘gross’
value of the estate, which includes the value of all
property – a term that not only includes real estate,
but also stocks, bonds, notes and cash - the deceased
person had an interest in cannot exceed the $1.5 million
threshold.
The good news is
that this threshold is set to increase yearly from now
till 2010. The bad news is that this will revert back to
$1 million in 2011, unless Congress decides otherwise.
Another black cloud hanging over the personal estate tax
exemption is the fact that Congress and repeal any
current limits and new limits at any time it so decides!
Marital
Exemption/Deduction
If the deceased person
has a surviving spouse at the time of their death, then
their estate can pass to the surviving spouse tax-free,
provided that (a) the estate so inherited is not of a
nondeductible terminable interest – meaning that, beside the
surviving spouse, some third party has an interest in the
property in question; and (b) the surviving spouse is a US
citizen. If either of these two qualifying factors is
present, then the exemption may not be available.
Funeral Expenses
Any and all funeral
expenses of the deceased person are tax deductible from the
estate.
Administrative Fees
All administrative fees
incurred by the estate subsequent the deceased person’s
death are also tax deductible.
Charitable Donations
While not all charitable
donations are necessarily tax deductible by the estate, a
large number of charitable donations are. So, if for no
other reason, you now have one very good reason to be
generous in death – you’d only have had to pay the money in
taxes in any event!
Gifts
Structured correctly, a
deceased person can reduce the estate tax payable by giving
away a gift to the beneficiary during their lifetime. The
Inland Revenue allow individuals to give away up to $1
million during their lifetime. Moreover, within the
threshold amount of $1 million, smaller gifts of $11,000 or
less can be given away in any one year to a beneficiary (up
to the aggregate threshold amount of $1 million).
So, if you are reaching
the end of your life, and don’t think you’ll have too many
needs in the time you have remaining, then the time may well
have come for you to consider giving your gifts away to
beneficiaries so that the aggregate total of your estate
does not exceed $1.5 million, or the aggregate amount you
give away to anyone but your US citizen wife, does not
exceed $1.5 million.
Information on
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Estate Tax Law Information
Learn
to minimize the estate tax.