Do I Need to Worry about Estate Taxes?
January 10, 2012 By The Law Offices of James A. Miller
In America, it seems as though we are always worrying about one tax obligation or another. Everything from our income to the food we purchase is taxed. Most Americans devote a considerable amount of time and effort to limiting their tax burden throughout the year and looking for every possible deduction and credit at the end of the year.
One area of taxation, however, that many people neglect to address is estate taxes. Failing to worry about the impact of estate taxes beforehand could result in the loss of a considerable amount or money and/or assets to your loved ones upon your death.
In most cases, when you die, all of your property, both personal and real, intangible and tangible, must be accounted for through a legal process known as probate. During probate, your assets are inventoried and valued and creditor claims are filed against the estate. Once the total value of the estate has been determined, estate taxes must be calculated and paid. Although there is an exclusion amount, which is subject to change, the value of all taxable assets is then subject to the typically high estate tax rate. The estate tax rate also changes regularly; however, it is not uncommon for the estate tax rate to be as high as the highest personal income tax bracket rate. Imagine, for example, if you have an estate with $500,000 of taxable assets and a current estate tax rate of 45 percent. After estate taxes are paid, your estate is only worth $275,000 -- a noticeable loss for your heirs and beneficiaries.
The good news is that there are a variety of estate planning tools that may be able to help you limit the amount of estate taxes your estate owes, or even avoid payment of estate taxes altogether. Since there is no way to know with certainty what the current exclusion amount will be, or current estate tax rate, at the time of your death, your estate planning goal will often be to limit the value of assets legally held by you at the time of your death. Various trusts, for example, can be used to transfer assets out of your estate, thereby keeping them out of reach of the dreaded estate tax.
ABOUT THE AUTHOR: James Miller
Experienced estate planning attorneys Worcester MA of the Law Offices of James A. Miller estate planning and business planning resources to residents of Worcester MA.
Copyright The Law Offices of James A. Miller
More information about The Law Offices of James A. Miller
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
In most cases, when you die, all of your property, both personal and real, intangible and tangible, must be accounted for through a legal process known as probate. During probate, your assets are inventoried and valued and creditor claims are filed against the estate. Once the total value of the estate has been determined, estate taxes must be calculated and paid. Although there is an exclusion amount, which is subject to change, the value of all taxable assets is then subject to the typically high estate tax rate. The estate tax rate also changes regularly; however, it is not uncommon for the estate tax rate to be as high as the highest personal income tax bracket rate. Imagine, for example, if you have an estate with $500,000 of taxable assets and a current estate tax rate of 45 percent. After estate taxes are paid, your estate is only worth $275,000 -- a noticeable loss for your heirs and beneficiaries.
The good news is that there are a variety of estate planning tools that may be able to help you limit the amount of estate taxes your estate owes, or even avoid payment of estate taxes altogether. Since there is no way to know with certainty what the current exclusion amount will be, or current estate tax rate, at the time of your death, your estate planning goal will often be to limit the value of assets legally held by you at the time of your death. Various trusts, for example, can be used to transfer assets out of your estate, thereby keeping them out of reach of the dreaded estate tax.
ABOUT THE AUTHOR: James Miller
Experienced estate planning attorneys Worcester MA of the Law Offices of James A. Miller estate planning and business planning resources to residents of Worcester MA.
Copyright The Law Offices of James A. Miller
More information about The Law Offices of James A. Miller
View all articles published by The Law Offices of James A. Miller
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
