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Estate and Gift Planning
A little planning can save thousands of dollars!
You
can't take it with you, but failing to plan for your estate can mean that the government,
rather than your heirs, may get the major portion of your hard-earned money. Why? Because
the top estate tax rate is a whopping 45%!
You may be aware of the $2,000,000 lifetime exclusion in
2008 and $3,500,000 in 2009 for estates. But the amount over that
may be taxed at rates starting at 39% and going as high as 45%. You may be surprised what
your estate is worth. Add up the value of all your assets. Don't forget life insurance
which may fall into your estate. If your total value exceeds the exclusion, you should
look into what a few simple planning techniques can save your family at estate
time.
Gifting also requires planning because
those rules used to be the same as the estate rules, but now that law
has changed. There are separate exclusions for gift tax with are
at $1,000,000 in all years.
In addition, there are some very effective estate planning ideas that can also cut your
current income tax bill.
Some planning possibilities:
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Current tax law allows you to give away
$12,000 per year per recipient. Your spouse
may join in the gift even if he or she is not an owner in the transferred asset. This
means that you could transfer up to $24,000 per year to each of your heirs. To double the
annual exclusion yet again, you may want to include spouses of your children. The person
receiving the gift does not need to be related to you. These annual gifts do not reduce
your once-in-a-lifetime exclusion. |
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If you have property which is not needed for your retirement, maybe it is a candidate
for transferring during your lifetime. If it is a large income-producer, the future income
will be taxed to the new owner and not to you, plus the property will be out of your
estate. |
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You can make unlimited transfers to your spouse either during your lifetime or through
your estate. There are no taxes on spousal transfers, regardless of size. But leaving
everything to your spouse may not be a good idea, since doing so fails to utilize the
lifetime exclusion amount in the estate of the first spouse to die. Planning will allow
you to use the exclusion in both estates, and you'll be able to transfer twice as much to
your heirs free of estate tax. |
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With proper planning, certain life insurance proceeds can be kept out of your estate. |
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