One common facet of estate preparing for everyone, however, is the requirements into consideration the possible tax consequences of estate planning. Both estate taxes and/or gift taxes are effective in reducing the assets with your estate up to 55 percent without careful estate planning ahead of your energy. A basic comprehension of how estate and gift taxes operate can help you understand the requirement for thorough estate planning.
– Estate Taxes:
When you die, your estate assets must be inventoried and valued as of the date of death. The total of most estate assets is then potentially subject to estate taxes. Your estate might take advantage of the existing exemption amount that refers to all estates. The exemption amount fluctuates every year. For 2012 the exemption amount is $5,120,000 — an all-time high. For 2013, however, it is set to return to $1 million unless Congress passes a whole new tax law. All assets over the exemption amount are going to be taxed. The tax rate also changes every year on account of modifications in the federal tax laws passed by Congress. Although the tax rate for 2012 reaches 35 %, that, too, is scheduled to improve to 55 percent for 2013 unless Congress acts. Unfortunately, there is no way to find out if you will die or what the actual exemption amount or tax rate will probably be. Planning for the worst-case scenario is most beneficial.
– Gift Taxes:
In the event you are planning that gifting your estate assets just before death may be the solution to avoiding estate taxes, reconsider. Gifts may also be taxed should they be over the lifetime exemption amount. These amounts, just like the estate exemption and tax rate amounts, will also be subject to change every year as federal tax laws change. Gift tax rates have historically been between 35 and 55 percent using the lifetime exemption amount around $1 million. That amount is a lot higher for 2012. Gifts that will not qualify for the yearly exclusion or lifetime exemption will probably be taxed at the existing gift tax rate.
The complex and ever-changing tax laws are just one more reason why smart consumers work with the experienced and qualified estate planning attorney to plan their futures. There is no way that self-help trusts obtainable in form books or websites or perhaps so-called non-lawyer living trust mills will offer the current critical tax planning provisions that you receive in the comprehensive plan prepared by a professional and qualified attorney.