When you are faced with the need to draft estate planning documents such as wills and trusts, working closely with an attorney who will explain all of your options is vital. Contact our firm today to speak with an experienced estate planning attorney.
Learn More About Wills and Trusts
At the law offices of Arlene Glenn Simolike, Esq. and Associates, P.C., our wills and trusts lawyers understand the importance of protecting your assets. We will assist you in establishing an estate plan that involves the right combination of wills and trusts to see that your wishes are addressed appropriately. Our services are available for clients in Philadelphia and Feasterville, as well as the surrounding parts of Pennsylvania and New Jersey.
Below, we have provided extensive information about wills and trusts. We encourage you to review it. When you would like to learn more about your case specifically, please get in touch with our attorneys. Contact us for a free half-hour consultation.
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Death and Taxes: Planning for Both
When you die, the assets and property interests you leave behind minus any debts make up your estate. Whether your assets go through probate or you have set up alternative means for transferring your property, any estate or other taxes owed at the time of your death must be paid. While taxes cannot be avoided, an estate planning attorney at Arlene Glenn Simolike, Esq. and Associates, P.C. in Philadelphia, Pennsylvania, can help you minimize your estate's tax burden as much as possible.
Taxable Estate
When someone passes away, he or she leaves behind a taxable estate. Under current law your taxable estate for federal estate tax purposes can be significantly larger than your probate estate. Your taxable estate includes everything, such as:
- All your property interests. Including any property interests you own and property interests in a trust controlled by you outright or by a trust to which you have significant "strings attached."
- All your qualified retirement plan proceeds. Qualified retirement plan proceeds are included unless you retired no later than 1984. Persons retiring no later than 1984 may qualify for a full or partial exclusion of these proceeds.
- All life insurance proceeds. Proceeds from life insurance policies owned by you at the time of your death or payable to your estate.
Estate Taxes
Federal estate taxes are imposed on property transferred at death. In addition, many states also impose estate or inheritance taxes on the same property. The amount of the tax is set on a gradual scale which increases with the size of the estate. These taxes decrease the amount of the share that ultimately will be distributed to the beneficiaries.
The estate tax is set to expire in 2010 for one year. In 2011, the tax will be reinstated to pre-2001 standards if Congress does not act to make the repeal permanent. Currently, tax payers can shelter $2 million under the general estate tax exclusion, which will increase to $3.5 million in 2009. This means that if the total worth of the estate, less any debts, is $2 million or less, there will be no estate tax imposed. If the tax is reinstated, the amount tax payers can shelter will revert to pre-2001 standards of $1 million.
Gift Taxes
One way to minimize the amount of estate taxes that must be paid upon death is to transfer property while still alive. While there is a gift tax imposed on these types of transfers, many can take advantage of the gift tax exclusion. Under current tax law, the standard "lifetime" amount you can shelter is $1 million. This means that throughout a person's life, he or she can give up to a total of $1 million away and not have to pay gift taxes on it. There is a limit on how much can be gifted per year. Currently, a single person can gift up to $12,000 per person to an unlimited number of people per year while married couples can double it to $24,000 per person.
The gifts you give each year are totaled and once you have gifted over $1 million, that amount is subject to the gift tax. Currently, the highest federal gift tax rate is 45%. Thus, if you have gifted $1.5 million, $500,000 will be subject to the gift tax. These taxes are scheduled to gradually decrease to 35% in 2010. As with the estate tax exemption, if Congress does not make the change permanent, the rate will return to pre-2001 levels in 2011. Given the complexities of estate and gift taxes, it is important to work with a tax professional to take full advantage of these exemptions.
Conclusion
The tax issues surrounding your estate can be quite complex. An experienced estate planning attorney at Arlene Glenn Simolike, Esq. and Associates, P.C. in Philadelphia, Pennsylvania, will help you address your tax issues and minimize the impact taxes have on your beneficiaries.
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