VIEWS: 17 PAGES: 1 CATEGORY: Legal POSTED ON: 9/6/2011
The most significant source of asset erosion you have to be prepared for when planning your estate is the estate tax. If you have never looked into the subject, you may be surprised to hear just how high the rate of this tax actually is.
Estate Tax & The Gift Tax Exemption The most significant source of asset erosion you have to be prepared for when planning your estate is the estate tax. If you have never looked into the subject, you may be surprised to hear just how high the rate of this tax actually is. As of this writing the maximum rate of the estate tax is 35%. A tax that will take over a third of the taxable portion of your estate is attention-getting, to say the least. But, to add to the pain, if there are no legislative changes in the meantime the rate of the estate tax will rise to 55% at the beginning of 2013. Whether or not your estate will be exposed to this harsh federal levy is determined by its value in relation to the amount of the estate tax exclusion that is in place at the time of your passing. Right now it is $5 million, but it is scheduled to be reduced to just $1 million upon the sunset of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 at the beginning of 2013. Now you may decide that you will simply make gifts to your heirs while you are still alive to reduce the value of your estate in an effort to gain estate tax efficiency. Unfortunately there is a gift tax in place to close this potential opening. Under current law the estate tax and gift tax are unified. There is a single $5 million exemption that can be used whenever you wish - during your lifetime or at death. There are some who assume that they can make tax-free gifts totaling $5 million during their lifetime and then have their $5 million estate tax exclusion to utilize as well. This is a misunderstanding. Again, the estate and the gift taxes are unified, so the two exemptions are unified. You have a total exemption of $5 million available to you to apply to your estate and any tax-free gifts that you give using this exemption. Experienced estate planning attorneys Oklahoma City OK of the Parman and Easterday offers estate planning and business planning resources to residents of Oklahoma City OK. To learn more about these free resources, please visit www.parmanlaw.com/ today.
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