Careful estate planning can prevent tax headaches for your heirs
Careful estate planning can lessen the chances that estate and transfer taxes will diminish the assets left to your heirs.
August 22, 2013 /24-7PressRelease/ -- Careful estate planning can prevent tax headaches for your heirs
Article provided by Burkley & Brandlin LLP
Visit us at http://www.burkley-brandlin.com/
Esteemed actor James Gandolfini may have passed away earlier this year, but his name lives on for two very different reasons. The first is obvious because of his award-winning television and movie career with an impressive cinematic legacy. The second didn't arise until after his death, though, and focuses on the tax nightmare created by his poorly conceived estate plan.
Gandolfini's will left percentages of his wealth to several loved ones, something that is common and sounds innocent enough. Unfortunately, his simplistic estate documents didn't take into account the estate and transfer taxes generated by the estimated $65 million in assets he left behind. Some of his loved ones will now likely have to liquidate a portion or all of the property they received in order to cover the taxes; something that could have been minimized or possibly avoided altogether with a tailored, comprehensive estate plan.
Even though Gandolfini's will was filed in New York, the same tax issues could arise in California or anywhere else in the nation.
Key points about estate taxes
The federal Internal Revenue Service collects taxes due on a decedent's estate. The rate of taxes collected will vary greatly based on the size of the estate, but it can be as high as 35 percent of the total value.
There are, however, exemptions and deductions that can be used to minimize the financial impact of estate taxes. For example, in 2013 it is only necessary to file a federal estate tax return if the estate is valued at more than $5.25 million. Estates worth less than the exemption amount will owe no federal estate taxes, and likely won't even need to file a return. Furthermore, since California law only requires estate tax returns to be filed if federal ones are, the same exemption amount applies on the state level as well.
Married taxpayers can take advantage of something called estate tax "portability," best described with a practical example. If Mary passes away with only $2 million in assets, then there is $3.25 million remaining of her estate tax exemption that her husband Ted can now tack on to his own exemption. This will give Ted's estate a total of $8.25 million worth of tax breaks.
There are also ways to transfer money, both in life and at death, that will lessen the blow that estate taxes will have. Should a decedent leave the entirety of the his or her assets to a spouse, no estate taxes will be due. The same is true if the entirety of the estate is left to a bona fide charitable organization. Also, it is possible to give up to $14,000 per person per year (adjustable for inflation) with no gift tax or estate tax consequences.
Other important comprehensive estate planning tools - like trusts- are also invaluable when it comes to minimizing the effect of state and federal estate taxes.
To learn more
Would you like to know how to structure your own estate plan to avoid leaving a tax burden for your loved ones? To learn more about this and other estate plan-related questions, consult an experienced California estate planning attorney in your area.
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