Estate Planning and Tax Consequences for Leominster Residents
March 14, 2012 By The Law Offices of James A. Miller
As a Leominster resident, you have probably given considerable thought and consideration to how you wish to structure your estate plan in order to transfer your estate assets to family members and loved ones upon your death.
While giving due consideration to how you wish to distribute your estate assets upon your death is certainly important, deciding how to accomplish that in lieu of the potential tax consequences is of equal importance. The transfer of assets can incur either estate taxes or gift taxes. In order to understand why it is important to structure your estate plan in a way that avoids, or minimizes, your estate or gift tax exposure, you need to understand how these taxes operate.
• Estate Taxes: Estate taxes apply to the value of your estate at the time of your death. Each decedent’s estate is entitled to exclude assets up to the current exemption amount. The estate tax exemption limit, as well as the estate tax rate, are subject to change each year. For example, for the year 2012, the exemption limit is at a historical high of $5 million and the tax rate is at an unusually low 35 percent. For 2013, however, the limit is set to be reduced to only $1 million and the tax rate increased to 55 percent. To put this in perspective, if you have an estate valued at $10 million and you die in 2012, your estate would lose $1.75 million as a result of estate taxes. Although that number is high, if you died just one year later, your estate would lose a staggering $4.95 million. Because it is impossible to know what the exemption amount and tax rate will be when you die, it is crucial that you use all the estate planning tools available to avoid or minimize your estate tax exposure.
• Gift Taxes: Gifting your estate assets before you die doesn’t work much better than bequeathing them at death. Gifts are also subject to taxation. Both a yearly exclusion amount and a lifetime exemption limit apply before gift taxes are required to be paid. Making use of the yearly exclusion can be a beneficial estate planning tool if you plan ahead. As with estate tax rates and exemption limits, gift tax rate and the lifetime exemption limit are subject to change each year.
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.
• Estate Taxes: Estate taxes apply to the value of your estate at the time of your death. Each decedent’s estate is entitled to exclude assets up to the current exemption amount. The estate tax exemption limit, as well as the estate tax rate, are subject to change each year. For example, for the year 2012, the exemption limit is at a historical high of $5 million and the tax rate is at an unusually low 35 percent. For 2013, however, the limit is set to be reduced to only $1 million and the tax rate increased to 55 percent. To put this in perspective, if you have an estate valued at $10 million and you die in 2012, your estate would lose $1.75 million as a result of estate taxes. Although that number is high, if you died just one year later, your estate would lose a staggering $4.95 million. Because it is impossible to know what the exemption amount and tax rate will be when you die, it is crucial that you use all the estate planning tools available to avoid or minimize your estate tax exposure.
• Gift Taxes: Gifting your estate assets before you die doesn’t work much better than bequeathing them at death. Gifts are also subject to taxation. Both a yearly exclusion amount and a lifetime exemption limit apply before gift taxes are required to be paid. Making use of the yearly exclusion can be a beneficial estate planning tool if you plan ahead. As with estate tax rates and exemption limits, gift tax rate and the lifetime exemption limit are subject to change each year.
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.
