Estate Taxes

Estate and Gift Taxes are known as transfer taxes.  With certain exceptions, individuals are only allowed to pass a certain amount of assets between each other free from tax.  Gift Taxes apply to gifts during one's lifetime, and Estate Taxes apply to amounts passing at death.

Estate Taxes are currently in a state of flux.  Every U.S. taxpayer is entitled to a unified credit which means a certain amount may pass untaxed.  Although the Estate Tax was repealed in 2010, in 2011 the Estate Tax was due to return with a 1 million dollar exemption (unified credit) and top tax rate of 55%.

However, Congress was able to come together in December of 2010 and enact some important legislation. The new legislation increases the estate tax exemption to 5 million dollars and lowers the tax rate to 35%.  Along with the increase in the estate tax exemption, the lifetime gifting and generation skipping tax exemptions were raised to 5 million dollars as well.  Finally, the new laws allow for the exemptions of spouses to be portable.

Please keep in mind, this act is only temporary through 2013.

There are several methods for reducing or eliminating estate taxes, even if your net estate exceeds the credit.

Do you believe you have, or will have, a taxable estate (if not sure answer yes)?