We spend our lives trying to build our assets for retirement, and passing something on to our kids and grandchildren. We plan on how to save on income taxes,but overlook our estates. Many of us don't even have wills or have them up to date. We have nothing in place to protect our estate from taxes, and this can be very costly to our loved ones. Some basic planning ahead can save thousands in tax dollars. People don't realize the federal estate tax rate is virtually double the income tax rate.
The Federal "death" tax is in flux, as to what's going on. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, The tax is completely gone for the year 2010. But the estate tax will go right back into effect in 2011 if congress doesn't act to make it permanent. With the Democratic party the majority in Congress after the 2006 election, it's unlikely that the estate tax will be repealed, although changes to the exclusions and rates will probably take place. So we're most likely right back to facing the estate tax again, in one form or an other.
This has lead commentators to have some fun with our system. Tax gone in 2010 and back in 2011, Makes 2010 the best time to pass on if you have a large estate.
Your financial planning will change over the years,so it's something you need to stay on top of. There can be times when giving a "gift" would work out better. As a gift the asset would be subject to the capital gains tax,which is capped at 15% vs estate tax that can go as high as 47%.This is especially true if you have large holdings, that go over the tax excluded limit. Set at 2 million the next two years, but no one knows where it will be in 2011. Some suggest it will be set at 1 million.
To protect what you've worked so hard for,I suggest getting started on it right away,no matter what age your at now. It can start as a simple will and grow and change as your needs change. I would recommend reading up on the subject then seek out an estate attorney. Here I'd ask friends or someone that has had experience with this if they would have any recommendations. I would study up on the subject so I didn't go into it blindly.
I could only touch on the very basic parts of this tax. But I do want to emphasize the importance of getting an estate plan together,so as not to pay more than needed on Estate taxes,and a possible burden to loved ones. This should also take into account your state tax if it has one. Right now 24 states have an inheritance tax and more will likely follow.
