Tuesday, November 3, 2009

Step 6 to Getting Yourself In Order: Watch Out For That Long Lost Uncle--Uncle Sam

We are up to Step 6 in our series about how to get yourself in order. You can read below for the steps preceding this Step 6.

In Step 6 we are concerned about Uncle Sam. Yes, that Uncle Sam, the federal tax system. In every estate plan we always analyze whether there are estate or death tax issues present. Primarily this involves examining the size of your estate and projecting its probable growth over time.

This is an important issue because you are permitted to leave an inheritance of a limited size before a significant tax is due. The federal estate tax is one of the highest taxes in the U.S. For the balance of 2009, the estate tax is 45% of each dollar over the estate tax exemption left to anyone not your spouse and that includes your kids!

Unless changed, the estate tax rate increases to 55% of each dollar over $1 million in 2011. Shocking? Yes, it is indeed.

We will cover death taxes in greater detail in a future article. The important point here is that estate taxes be considered in getting yourself in order. To accomplish this, when you meet with your estate planner, focus on these questions:

1. What is the size of your estate currently?

2. Have you calculated the estate size correctly?

3. Make sure all elements are included, especially your life insurance.

4. Is your estate expected to grow over time?

5. How does your estate size compare with the available federal estate tax exemption?

6. How is your estate affected by death taxes in states where you own property?

7. Have you maximized your available exemptions in your estate plan?

8. Have you properly coordinated the marital deduction with available estate tax exemptions.

7. Are you subject to generation skipping taxes?

8. Are you subject to gift taxes?

9. Do you understand the interplay between gift taxes and death taxes?

10. Do you understand how the different tax exemptions operate and are different?

11. Do you understand the changes coming at you in the current estate tax laws?

By asking and focusing on these questions, you will be well on your way to accomplishing Step 6 to getting yourself in order. Good luck.

1 comment:

  1. The list of questions is excellent. Thank you for sharing it.

    ReplyDelete