Death tax or estate tax is what the IRS and state agencies takes out of the estate you leave behind when you die. The biggest problem with this particular tax is that Congress seems unable to find a permanent answer as to how much it should be. Back in 2010, they completely eliminated the tax so that there was no federal estate tax that year. In 2011, up to $5 million could be passed on without any inheritance tax. Talk to an estate planning expert or lawyer to find out what the current tax rate and ceiling are.
Would you like to find out more about death tax? Our attorneys are here to help you and your family with this. Contact a wills and trusts lawyer in your area today to discuss the details of your case and explore your options.
The attorney will also suggest ways to reduce estate taxes and probate costs, as listed below.
The exemption trust mentioned above saves double taxation. For instance, when one spouse dies first, the estate goes into the trust and is not taxed. The question only comes up when the second spouse passes away. Since the estate gets only one exemption, it is important to make it count and use the exemption once and only after the second spouse dies.
The only way to save life insurance benefits is to set up what is known as an ILIT or Irrevocable Life Insurance Trust, which keeps the policy and its benefits out of the estate.
Did you know?
As a couple, you can gift up to $26,000 per year without being taxed.
To avoid the estate being taxed, aged couples often start gifting money and assets. You can gift $13,000 per year as an individual and $26,000 as a couple, up to an overall lifetime limit of $1 million.