Inheritance tax planning - estate tax planning
An experienced tax lawyer or trust and estate tax lawyer is needed to prepare effective tax planning for the distribution of an inheritance.
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There are a number of things in the way of tax and estate planning that you can do now to prepare your estate in the way of inheritance tax planning
Estates are subject to two kinds of taxes: Federal Estate Tax and State Death Tax.
The Federal Estate Tax has a maximum of 45% through 2009. The estate tax has been repealed for 2010 and the highest gift tax will be decreased to 35 in 2010.There is, however, an exemption from this tax if the value of your estate is below a certain threshold. In 2008, for example, an estate worth less than $2,000,000 would not be subject to estate tax. This exempt amount is increasing annually as follows:
- 2008 - $2,000,000
- 2009 - $3,500,000
- 2010 - unlimited
You can go to the following website to figure out your tax liability: www.IRS.gov.
One way to reduce the amount of your estate is to make gifts during your lifetime of up to $11,000 per individual or up to $22,000 per individual if you are married. The tax code is set up to prohibit a wealthy individual or couple from gifting away their estate. If you exceed the maximum annual gift amount of $11,000/$22,000, then the excess is taxed under the used gift exemption.Assets transferred to a spouse are not subject to estate taxes. Such transferred assets are also excluded from calculating the estate value under the estate tax exemption. There is of course future tax liability for the transferred amount to the surviving spouse.
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