 |
Estate and Gift Taxes
Taxes play a large role in developing an
effective estate plan. Most of us understand
income tax with a top marginal rate of 39.6% and
capital gains tax with a top rate of 20%. What
most people are shocked to learn is that the
estate tax starts at 37% and tops out at 50%!
Estate taxes are final taxes on assets that have
probably already been subject to income and
capital gains taxes, sometimes many times over.
Sadly, a lot of people fail to do estate tax
planning. Proper estate planning allows you to
structure your estate in such a manner that your
estate tax liability is drastically reduced or
even eliminated. This process can be as simple
as transferring what you own (assets) into the
name of a revocable trust, created by you and
for you, and eventually for your loved ones.
In 2005, upon death, there is an exemption
amount of $1,500,000 per individual. This means
you could give away $1,500,000 worth of assets
at death, without negative estate tax
consequences, however, anything over that amount
would be subject to a 47% tax rate!
The Following Table Shows the Key Changes in the
Estate and Gift Tax Exemption Rates:
A rough estimate of death taxes can be
calculated by taking your Net Estate Value less
(-) your Lifetime Gift Exemption Amount (see
chart below) times (x) 50%. If your total net
worth is less than the applicable exemption
amount in the year of your death there are no
federal estate taxes due.
|
Year |
Lifetime Gift
Exemption Amount |
Death Time Gift
Exemption Amount |
Maximum Estate
Tax Rate |
|
2005 |
$1,000,000 |
$1,500,000 |
47% |
|
2006 |
$1,000,000 |
$2,000,000 |
46% |
|
2007 |
$1,000,000 |
$2,000,000 |
45% |
|
2008 |
$1,000,000 |
$2,000,000 |
45% |
|
2009 |
$1,000,000 |
$3,500,000 |
45% |
|
2010 |
$1,000,000 |
Repealed |
Repealed |
|
2011 |
$1,000,000 |
$1,000,000 |
55% |
|
|
Circular 230 Disclosure:
Pursuant to recently-enacted U.S. Treasury
Department Regulations, we are now required to
advise you that, unless otherwise expressly
indicated, any federal tax advice contained in
this communication, including attachments and
enclosures, is not intended or written to be
used, and may not be used, for the purpose of (i)
avoiding tax-related penalties under the
Internal Revenue Code or (ii) promoting,
marketing or recommending to another party any
tax-related matters addressed herein.
Disclaimers: Use
of this site is governed by our disclaimers and
terms of use agreement.
Law Offices of Sydney C. Kirkland
220 W. Grand
Avenue
Escondido, California 92025
Phone: (760) 746-1855
Fax: (760) 738-8733
info@sandiegoestateplanners.com
|
FAQs
