There is a federal estate tax marital deduction between a husband and a wife that allows you to bequeath an unlimited amount of money to your spouse without incurring any estate tax liability. At the current time the estate tax carries a 40% top rate, and the amount of the exclusion is $5.25 million. (You may see this exclusion figure increase next year if an adjustment for inflation is applied.) Anything that you pass along to your heirs other than your spouse that exceeds $5.25 million … [Read more...] about Marital Deduction Only Afforded to U.S. Citizens
Taxes
Tax Benefits Realized Through ILIT
Certain steps must be taken to reduce your estate tax liability if the value of your assets exceeds the exclusion amount. One course of action to this end could be the creation of an irrevocable life insurance trust or ILIT. When you convey assets into an irrevocable trust rather than a revocable trust you no longer retain incidents of ownership. Therefore, these trusts are often utilized by people seeking asset protection and estate tax efficiency. When you are tallying your … [Read more...] about Tax Benefits Realized Through ILIT
Estate Planning: Four Things to Think About
We would like to highlight four important components to consider when you are engaged in the process of estate planning. Death Taxes When you are looking forward toward the eventual transfer of your financial resources to your heirs you must consider the impact of death taxes. The inheritance tax in the state of Indiana has recently been repealed, but residents of our state still have to contend with the federal estate tax. The maximum rate of the tax is 40% and the exclusion in … [Read more...] about Estate Planning: Four Things to Think About
Powerball Winner Faces Immediate Estate Tax Exposure
Winning a large lottery is a dream come true, but you are faced with immediate estate tax exposure if you were to win over $5.25 million. A recent Powerball lump sum payout totaled almost $371 million. (The annuity option would pay over $590 million) . The ticket was sold in Florida, where there is no state income tax to pay. But 25% would be deducted from the lump sum for federal income taxes, leaving $278 million. You might think that paying almost $100 million in taxes would be enough, … [Read more...] about Powerball Winner Faces Immediate Estate Tax Exposure
Paul Kraft Weighs in on End of Indiana Inheritance Tax
The retroactive repeal of the Indiana inheritance tax is perhaps the biggest story circulating throughout the estate planning community here in the state of Indiana at the present time. Inheritances are no longer subject to a state inheritance tax if the decedent passed away after December 31st of 2012. An inheritance tax is potentially levied on each person who is receiving an inheritance. An estate tax is levied on the estate as a whole before inheritances are … [Read more...] about Paul Kraft Weighs in on End of Indiana Inheritance Tax
What Is a 529 Plan?
A 529 plan is a college savings plan that is offered by individual states. You contribute assets into the plan and they are invested, similar to the way that a 401(k) plan operates. You name a beneficiary who will utilize these assets to pay for college expenses. If the markets are favorable these assets will continually grow, and this growth is not taxable if the money is ultimately used for qualified purposes. These plans can be beneficial for those who are looking for estate tax … [Read more...] about What Is a 529 Plan?
Why Would You Want a Defective Trust?
If someone told you that you could work with an estate planning lawyer to create a defective trust how would you feel about that? Most people are automatically going to equate the term "defective" with something that is useless. In fact there is an estate planning device called an intentionally defective grantor trust that is in fact more effective than it is defective in practice. Some people have to take steps to gain estate tax efficiency. The estate tax exclusion is $5.25 … [Read more...] about Why Would You Want a Defective Trust?
Possible Estate Tax Hike in the Offing
The estate tax parameters were newly defined after the enactment of the American Taxpayer Relief Act of 2012. When you look back on the situation that was described as a path toward the fiscal cliff this precipice represented a plunge into a sea of tax increases and spending cuts. One of the taxes that would have went up was the estate tax. Under the laws as they existed throughout 2012 the top rate of the estate tax was going to rise to 55% in 2013 while the exclusion was reduced to … [Read more...] about Possible Estate Tax Hike in the Offing
Highest Court Considering Windsor Case
Because of provisions contained within Section 3 of the federal Defense of Marriage Act, marriages between people of the same sex are not recognized by the federal government. This is true regardless of where the marriages are in fact sanctioned. This has estate planning implications because there is an unlimited marital estate tax exemption. Heterosexual people who are married can leave any amount of money to their spouses without incurring any estate tax liability. Legally married … [Read more...] about Highest Court Considering Windsor Case
Giving Taxable Gifts? IRS Must Be Notified
Last year there was an incentive for people to give large gifts to their loved ones. The gift tax is unified with the estate tax, and in 2012 the unified exclusion was $5.12 million, and the maximum rate was 35%. Throughout 2012, the existing laws would have resulted in an increase in the top rate to 55% and a reduction in the exclusion to $1 million in 2013. Let's say that you had $5 million in total wealth. You could give substantial gifts to people who would otherwise be … [Read more...] about Giving Taxable Gifts? IRS Must Be Notified
