Whats The Deal With Estate Taxes?

Estate taxes are federal taxes placed upon any estate above a certain net worth

. The net worth of an estate is the value of all property and financial assets minus the total of debts that are owed.

Current Taxes

In 2009 all estates worth more than 3.5 million dollars were assessed with a forty-five percent federal tax. As you can see, estate taxes can be quite a financial burden for your family.

As of January 1, 2010 the federal tax law expired. This means that there is currently no level at which any estate is taxable. Any decedent who passes away in 2010 will not have estate taxes assessed on their assets. The only way this may change is if Congress initiates a law quickly, which may be doubtful this late in the year.

Next Years Tax

In 2011, the federal tax exemption will return to the 2001 level of 1 million dollars with a rate of fifty-five percent. Next year, more estates will be taxable than in recent years. This huge difference from 2010 to 2011 has made estate planning very difficult.

How to Plan

When trying to avoid estate taxes it is best to determine your net worth each year and speak with your attorney to see how estate taxes will affect you.

If you are currently planning your estate, you will likely want to focus on the low exemption rate expected next year. With the help of your attorney you can use advanced estate planning to reduce your taxable estate.

To accomplish this, your attorney will likely recommend creating lifetime trusts for children and grandchildren or a charitable trust, which could also save you money on income taxes. These trusts can help to shelter some of your assets and lower your taxable estate. When you save money on estate taxes, your family will have a safer financial future.

by: SextonLawAR

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