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How Much Can A Oklahome Resident Pass Free of the Federal Estate Tax?

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					 HOW MUCH CAN AN
OKLAHOMA RESIDENT
  PASS FREE OF THE
FEDERAL ESTATE TAX?




          By Larry Parman
   OKLAHOMA ESTATE PLANNING ATTORNEY
        The federal estate tax parameters are applicable to citizens of all 50 states. You
        may have heard that people in different states have different levels of tax
        responsibility, so it is understandable that some individuals are looking for
        clarity.

        Though the vast majority of states do not collect state level estate taxes, there are
        states that have their own estate taxes. Clearly, people who live in these states
                                                         have an added level of concern. In
                                                         many      cases   the   amount   that    is
                                                         excluded on the state level is lower
                                                         than the federal estate tax exclusion.

                                                         The good news for people in Oklahoma
                                                         is that we no longer have a state level
                                                         estate tax. We had an estate tax up
                                                         until 2009, but it is no longer in place.

                                                         However, you are exposed to the
        federal estate tax as an Oklahoma citizen if the amount of your assets exceeds
        the amount of the federal estate tax exclusion.

        HOW MUCH IS THE FEDERAL EXCLUSION?

        At the federal level, a $5 million exclusion was put into place for the 2011
        calendar year. Under laws that existed at that time the same exclusion would
        hold sway in 2012, but there would be an adjustment for inflation. This
        adjustment was applied, and in 2012 there was a $5.12 million exclusion.

        At the end of 2012 there was uncertainty with regard to the estate tax exclusion.
        The parameters described above were in place because of a tax relief act that was
        passed at the end of 2010. That measure was scheduled to expire at the end of



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        2012.

        After the expiration the estate tax exclusion would go down to $1 million. This is
        assuming that no legislative measures were passed that would change the lay of
        the land.

        But there was a piece of legislation passed at the very end of 2012 that we are
        now calling the American Taxpayer Relief Act of 2012. It allows the estate tax
        exclusion to stay along the same path that started in 2011 with a $5 million
        figure adjusted annually for inflation.

        This is the back story. In 2014 the estate tax exclusion is $5.34 million, and this
        figure is in place after another inflation adjustment was applied at the beginning
        of this year.

        There is no scheduled expiration for these currently existing parameters. There
        is a provision in place that allows for ongoing inflation adjustments on an
        annual basis.

        IS THIS ARRANGEMENT PERMANENT?

        As stated above there is no expiration or sunset date for the parameters that are
        in place at the present time. This is a deviation from what we traditionally see
        the federal government do. For this reason some people are calling the current
        estate tax parameters permanent.

        However, this is really not an accurate description. Viewing the current estate
        tax parameters as truly permanent can actually be quite dangerous because
        people may gain a false sense of security.




How Much Can an Oklahoma Resident Pass Free of the Federal Estate Tax?   www.ParmanLaw.com    3
                                             As we pointed out in the previous section,
                                             legislative changes can alter existing laws. The
                                             estate tax parameters are definitely subject to
          Estate planning is an
                                             change. In fact, a significant change has already
          ongoing process. It is             been proposed by the White House. The White
          not a "one and done"               House budget proposal for 2014 includes an
          kind of deal. Life does            increase in the federal estate tax that would be
          not stand still, and it is         implemented in 2018.
          likely that your existing
                                             This proposal would set the clock back to 2009.
          estate plan will need
                                             During that year the federal estate tax exclusion
          ongoing adjustments
                                             was $3.5 million, and the top rate of the tax was
          over the years.
                                             45%. We have a 40% maximum rate right now,
                                             and as we have already made clear the amount of
                                             the federal estate tax exclusion in 2014 is $5.34
        million.

        The proposal outlined above may or may not come to fruition. It is certainly
        something to keep a close eye on if you are in possession of wealth that hovers
        somewhere in the vicinity of $3 million to $6 million or more.

        Whether this proposal is actually adopted or not, you should certainly be aware
        of the fact that tax laws can and do change. Estate planning is an ongoing
        process. It is not a "one and done" kind of deal. Life does not stand still, and it is
        likely that your existing estate plan will need ongoing adjustments over the
        years.

        Laws can change, and your own financial situation can improve dramatically.
        Your estate plan may have been constructed when you were not exposed to the
        estate tax. If you do become exposed you must take immediate action to revise



How Much Can an Oklahoma Resident Pass Free of the Federal Estate Tax?   www.ParmanLaw.com       4
        your plan. Every day that you spend with an obsolete plan is a day that you are
        risking perhaps millions of dollars unnecessarily.

        UNLIMITED MARITAL DEDUCTION

        When you are considering how you want to utilize your $5.34 million estate tax
        exclusion you should understand that you don't need to use any of it to give your
        spouse an inheritance. Under the
        tax code you may bequeath any
        amount of property to your spouse
        free of the estate tax because of the
        unlimited marital deduction.

        You do have to be married to an
        American citizen to take advantage
        of this deduction.

        CONCLUSION

        If your assets exceed $5.34 million in value your financial legacy is at risk.
        Fortunately you do not have to resign yourself to a 40% levy on everything that
        exceeds this amount.

        There are smart legal strategies that you may employ to minimize your exposure.
        You can find out about them by consulting with a licensed estate planning
        attorney.




How Much Can an Oklahoma Resident Pass Free of the Federal Estate Tax?   www.ParmanLaw.com   5
        REFERENCES

        Internal Revenue Service
        http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-
        Gift-Taxes


        Forbes
        http://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-
        deal-estate-and-gift-tax-explained/




How Much Can an Oklahoma Resident Pass Free of the Federal Estate Tax?   www.ParmanLaw.com   6
        About the Author
        Larry Parman

                                    After helping his own family deal with a lengthy probate and a battle with
                                    the IRS following his father’s death in a farm accident, Larry made a
                                    decision to help families create effective estate plans designed to reduce
                                    taxes, and minimize legal interference with the transfer of assets to one’s
                                    heirs, and protect his clients’ assets from predators and creditors.
                                    Following a dozen years in the investment banking and financial services
                                    business, in the mid-1980s Mr. Parman formed a law firm that gives
                                    families the peace of mind that comes from having created a premier
                                    estate and financial plan.

                                      After forming his law firm in 1984, he offered a series of public and
                                      private seminars to inform the public about using a Living Trust as the
        foundation of a family’s estate plan. Today, Parman & Easterday is one of the leading business and
        estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning,
        elder law, asset protection, and providing effective estate planning solutions for clients. Today, the
        firm’s premier estate plan design is referred to as a Legacy Wealth Plan.

        Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the
        importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured
        speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous
        published articles on financial and estate planning matters and the co-author of two books, Estate
        Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in
        Oklahoma: Settling the Affairs of Your Loved Ones.

        Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also
        a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the
        Oklahoma City Estate Planning Council.




                                         www.ParmanLaw.com
              OVERLAND PARK, KS                                 OKLAHOMA CITY, OK
              10740 Nall Avenue, Suite 160                      13913-B Quail Pointe Drive
              Overland Park, KS 66211                           Oklahoma City, OK 73134
              Phone: (913) 385-9400                             Phone: (405) 843-6100
              Fax: (913) 385-9422                               Fax: (405) 917-7018

How Much Can an Oklahoma Resident Pass Free of the Federal Estate Tax?              www.ParmanLaw.com             7

				
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