An estate is the property you left behind when you died. It consists of the assets you accumulated during your lifetime. The purpose of estate tax planning is help with the management, accumulation, and disposition of your assets. It is important to have estate tax planning in place to avoid a whopping estate tax bill upon your death. Gift tax planning involves giving away your property as a gift during your lifetime, in general. Both of these subject areas are very complex and have stringent tax rules and regulations in place.
Estate tax planning generally involves saving and reducing taxes, protecting your assets from creditors, avoiding or reducing probate costs, and making certain your assets are given to who you want them to go to. It also provides for measures that need to be taken if you were incapacitated. Overall, it is to your benefit to have estate tax planning.
Here are some situations that may arise that will cause you to think about if you need estate or gift tax planning:
Will you be able to handle an unexpected situation involving your estate? Do you have the funds, significant cash available? Are you currently saving taxes by having the correct forms of asset ownership? (This means are all your assets in your name, your spouseís name, or other. Is that the best option for estate tax purposes?) Are you saving expenses this way? What is the value of your owned assets? Estate tax planning can help you with all these areas. Plus, good estate tax planning can help you save inheritance tax.
Do you have a will? As you know, a will is a legal document that spells out who gets what that you own upon your death. If you die with jointly-owned assets, the assets will transfer to your spouse (or whomever you jointly owned them with). However, if you do not have a will, the assets will go to your state. Assets will also go to the state if you own them solely and die.
Even though the estate tax laws have an exclusion of $2 million of assets per individual taxpayer, it is important to protect your assets against any future peril. There is a 46% per tax rate above the $2 million exclusion, also. See why you need estate tax planning? Thatís a whopper of a tax rate. You need to find ways to lower your estate legally. Good estate tax planning can help you with this.
Gift tax planning consists of asking yourself if you plan on giving any of your property away as a gift. If so, to whom? Your family members, charitable organization, or other? Have you been giving gifts all along? Are they appropriate for your best tax advantage? Do you need a gift tax plan to help you with your gift giving? Are you unsure about how certain gifts will be taxed to you or your recipient? Gift tax planning can help you with these concerns. Also, did you know that the gift you give today could provide you with a larger estate tax exclusion in the future? Your estate tax planner would know this. If done (and planned) properly, gifts can help lower estate taxes.
Estate and gift tax planning are specialized forms of tax planning. They involve complex and every-changing IRS tax laws. Find an estate and gift tax professional who can help you with this complex area.
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