In the United States, certain states collect a death tax based on the value of the deceased person’s estate and who inherits it. Such states are known as having a decoupled estate tax—meaning that the state has an estate tax separate or in addition to the federal estate tax. While California does not have a decoupled estate tax, it does have a higher income tax than many states. As such, it is critical to discuss your estate and tax planning needs with a qualified legal professional.
Entries in Tax Planning in Estate Planning (11)
As a result of a 2010 tax law, a surviving spouse can receive his or her deceased spouse’s unused estate tax exemption. This is called a “portability” election. You may have seen it called the “deceased spousal exclusion amount” or “DSUE amount.” In essence, a portability election allows a surviving spouse to apply the DSUE amount to his or her own taxable transfers during life and after death. Using the portability election can save a significant amount of estate tax and income tax, depending on your circumstances and assets.
If you live or own property in one of the 20 jurisdictions listed below, then you may have a state death tax issue that requires planning. Currently 20 U.S. jurisdictions collect a death tax at the state level: Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, and Washington. Even if you aren’t a resident of these states at your death, you may have state-level death tax issues if you own property in any of those states. Also, you should consider estate tax efficient ways to pass assets to your heirs if they live in one of these states.
Studies have shown that 70% of family wealth is lost by the end of the second generation and 90% by the end of the third. Help your loved ones avoid becoming one of these statistics. You need to educate and update your heirs about your wealth transfer goals and the plan you have put in place to achieve these goals.
2015 Inflation Adjustments for the Estate Tax Exemption And Trust Income Tax Brackets—What They Mean To You
The Internal Revenue Service has released the official inflation adjustments that will affect 2015 federal reporting for estate taxes, gift taxes, generation-skipping transfer taxes, and estate and trust income taxes.
Don’t let the chaos of the holiday season prevent you from avoiding federal gift tax by making “annual exclusion” gifts, medical payments gifts, and educational gifts. Gifting is a great way to take money out of your taxable estate, while simultaneously providing for loved ones.
If you are married and you die without a Last Will and Testament, you may mistakenly believe that your spouse will still inherit your entire estate. Not so fast. Who will inherit your estate depends on several different factors: 1) is you property titled properly, 2) is a prenuptial or postnuptial agreement in effect, and 3) the intestacy laws in the state in question.
Many people believe that once they set up and fund a revocable living trust, property held in the trust will avoid estate taxes after they die. In reality, this may or may not be true depending on your choice of beneficiaries and the terms written into your trust agreement.
Portability allows married couples to use two estate tax exemptions and save significant amounts in estate taxes without lifetime planning and without the division of assets. This planning option first appeared in 2010, but, because it was a temporary measure, many estate planners were hesitant to rely on it. It became permanent law in 2013 and is now considered a viable tool for many married couples.
What you don’t know about Social Security benefits can hurt you and your spouse for the rest of your lives. Here are three traps to avoid when taking your benefits.
Many retirees today worry about having enough money for their retirement. Of special concern is if there will be enough money to provide for the surviving spouse. This is called “shortfall risk,” and it is a valid concern. People are living longer and health care costs continue rising, especially long-term care, which many seniors will need. In addition, the recent recession has given us setbacks in investments and record low interest rates. When combined, these issues can have a serious effect on retirement savings and projected income. Nevertheless, there are some things you can do now to help manage your shortfall risk and protect your assets.