|
Estate & Gift Tax
Both the Federal Estate Tax (“Estate Tax”) and the Federal Gift Tax (“Gift Tax”) are transfer taxes. The Gift Tax taxes the amount of wealth transferred by a donor during life. The Estate Tax taxes the amount of wealth transferred by a decedent at the time of his or her death.
Because of the gross negligent inaction of Congress in 2009, there is temporarily no Estate Tax in 2010. However, in 2011 it returns at a 55% maximum rate for all property valued in excess of $1 million. Previously, the maximum rates applied to all property valued in excess of $3.5 million. What does that mean? It means that a far greater amount of people will encounter the maximum Estate Tax. Married couples can execute a Living Trust and/or Will and their Estate Tax exemption will effectively double to $2 million at the second death. There is no Estate Tax for death transfers made to a spouse, if that spouse is a U.S. citizen.
The Gift Tax rate parallels the Estate Tax schedule but allows for an annual exemption of $13,000 per donee. The lifetime maximum credit for gifts is currently and on into 2011, $1 million. The Estate Tax exemption is reduced by the amount of Gift Tax exemptions received during the decedent’s life. In other words, if the decedent gifted the full $1 million credit, the Estate Tax will be applied to all their property upon their death with no exemptions (assuming they die in 2011 or later). Again, there is an unlimited deduction for gifts and death transfers made to a spouse, if that spouse is a U.S. citizen.
Anyone whose loved one has assets of value and dies needs to consider the Estate Tax consequences. The Estate Tax is reported by means of Federal Form 706. There are also income tax consequences with respect to the Estate Tax because the decedent may or may not have the right to step up the tax basis of the assets to the fair market value at the date of death.
There are many complications and sophisticated factors involved in the Estate Tax area upon the death of a decedent. The decedent’s executor/trustee and loved ones need to consult with proper legal counsel relative to the administration of the Trust and/or the estate and the issue of Estate Taxes. Our firm has extensive experience in preparing Estate Tax Returns. We know how to gather together the necessary information, supervise any appraisal process and prepare the Estate Tax Return in the most tax saving manner possible. Filling out an Estate Tax Return is not for amateurs. Moreover, because there are several legal issues involved, we think that it is better to have the return prepared by competent legal counsel as opposed to an accountant or a CPA. However, if a CPA or accountant is involved, we will work with them to protect the rights of the beneficiaries of the estate and to maximize tax savings.
|
