5 Essentials You Need to Understand About Estate Taxes
- By Admin
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- 10 Apr, 2017
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Proper estate planning is critical. First, however, you may want to understand a few basics about estate taxes. Here's what you need to consider.
Worried about estate taxes? Want to protect your estate from taxation after your death? Then, proper estate planning is critical. First, however, you may want to understand a few basics about estate taxes. Here's what you need to consider.
1. Estate Tax Affects Less Than One Percent of the Population
According to some estimates, the estate tax only affects between 0.14 and 0.20 percent of Americans. That's two or fewer people out of every thousand. Although the total number of affected people is small, it's still important to understand this tax, and if you think you might be affected, you need to plan accordingly.
2. The Threshold for Federal Estate Tax Is Over $5 Million
As of 2017, the threshold for federal estate tax is $5.49 million. If your estate is worth less than that amount, it won't be subject to estate tax. Note that this amount changes annually based on inflation, and of course, it's always subject to change based on various political rulings.
If your estate is worth more than the threshold, the tax doesn't apply to the entire value of the estate. Instead only the value of the estate over the threshold gets taxed. For example, if your estate is worth $6 million, only the $510,000 over the threshold gets taxed.
However, that amount is taxed at a rate of 40%. That can add up quickly, which is why it helps to plan ahead.
If your estate is worth more than the threshold, the tax doesn't apply to the entire value of the estate. Instead only the value of the estate over the threshold gets taxed. For example, if your estate is worth $6 million, only the $510,000 over the threshold gets taxed.
However, that amount is taxed at a rate of 40%. That can add up quickly, which is why it helps to plan ahead.
3. There Is a Spousal Exemption
Typically, if you die, all of your assets can pass to your spouse and avoid any estate tax. Additionally, the exemption or threshold discussed above also passes to your spouse. That amount gets added to your spouse's threshold when he or she dies.
In other words, if you die and the threshold is $5.49 million and then your spouse dies when the threshold is the same amount, the total threshold for the estate is $10.98 million. Again, only amounts over that threshold get taxed.
In other words, if you die and the threshold is $5.49 million and then your spouse dies when the threshold is the same amount, the total threshold for the estate is $10.98 million. Again, only amounts over that threshold get taxed.
4. California Has No Estate or Inheritance Tax
In addition to the federal estate tax, some states levy their own estate or inheritance tax. Luckily, California does not have either of those taxes. If you have a sizeable estate in California, you only need to worry about the federal taxes.
5. You May Face inheritance Taxes If You Inherit Assets From Another State
Although you won't face these state taxes as a resident of California, they may come into play if you inherit assets from someone who lives in another state. There are fifteen states as well as the District of Columbia that levy estate taxes. As an heir, you don't really have to worry about those taxes. They are assessed on the estate before the assets are distributed.
However, six states including Nebraska, Iowa, Pennsylvania, Kentucky, Maryland and New Jersey all have inheritance taxes. These taxes are applied after you inherit the funds.
The rules vary from state to state, and you typically face different rates depending on the nature of your relationship with the deceased person. For example, if you inherit assets from your mother who lives in Kentucky, you don't have to pay any tax, but if you inherit more than $1,000 from your uncle in Kentucky, you have to pay between 4 and 16 percent in tax.
It's important to understand how different state rules may affect your inheritances. It's even more important to understand these rules if you decide to move to another state.
At the Law Offices of Steve C. Benton, we help our clients with estate planning, trusts, wills and probate issues. If you have questions or concerns, we would love to help you. Contact us today.
However, six states including Nebraska, Iowa, Pennsylvania, Kentucky, Maryland and New Jersey all have inheritance taxes. These taxes are applied after you inherit the funds.
The rules vary from state to state, and you typically face different rates depending on the nature of your relationship with the deceased person. For example, if you inherit assets from your mother who lives in Kentucky, you don't have to pay any tax, but if you inherit more than $1,000 from your uncle in Kentucky, you have to pay between 4 and 16 percent in tax.
It's important to understand how different state rules may affect your inheritances. It's even more important to understand these rules if you decide to move to another state.
At the Law Offices of Steve C. Benton, we help our clients with estate planning, trusts, wills and probate issues. If you have questions or concerns, we would love to help you. Contact us today.
Estate planning is an important part of life for everyone. It is crucial that you have your financial house in order before you pass away so that everything is handled as per your wishes. One major thing to consider is who will receive an inheritance upon your death. When making your will, you can include those to whom you wish to leave money or property.
For one reason or another, you may decide that you wish to disinherit someone you have included in your will. That is your right, no matter what anyone else may think. There are several things to keep in mind when you intend to disinherit someone from your will.
For one reason or another, you may decide that you wish to disinherit someone you have included in your will. That is your right, no matter what anyone else may think. There are several things to keep in mind when you intend to disinherit someone from your will.
If you are beginning to engage in estate planning, or are just looking to make adjustments to the plan that you already have in place, you may want to consider establishing a revocable living trust. This is very different than just creating a will.
Although both will eventually get the contents of your estate to your beneficiaries, a living trust offers you additional benefits while you are living. A living trust is not for everyone, but you may want to consider it if you fit into one of these two categories.
Although both will eventually get the contents of your estate to your beneficiaries, a living trust offers you additional benefits while you are living. A living trust is not for everyone, but you may want to consider it if you fit into one of these two categories.
When you hear the words "estate planning," you may assume this is only an issue you need to face if you're older, or that it is a problem reserved for the wealthy. However, no matter your age or how much money you have in the bank, it is important to protect your assets and loved ones from unnecessary heartaches, squabbles and costs after you're gone.
One of the best options for many people is a living trust. You may be familiar with the idea of a trust or will but not sure what exactly a living trust is and if it is the best option for you and your family. Here are a few frequently asked questions you might have about living trusts.
One of the best options for many people is a living trust. You may be familiar with the idea of a trust or will but not sure what exactly a living trust is and if it is the best option for you and your family. Here are a few frequently asked questions you might have about living trusts.
Facing your own mortality can be a difficult challenge for anyone. It may not be particularly pleasant to imagine the world after you've left it, but if you've spent your life working hard to build a strong financial base, it's important that it can be passed on to your loved ones with minimal restrictions and interference.
Unfortunately, there are some common traps that many people fall into when planning their estates. In some cases, those traps may not even reveal themselves until the estate is executed, by which time it's far too late to fix the problem. The best way to minimize those concerns is to take the time to learn about common traps and ways you can avoid them.
Below, you'll find a guide to common estate planning mistakes that you should keep in mind when working with your attorney. Solid estate planning will be a massive relief to your family and interests after you've passed on and will allow you to leave a legacy that you can be truly proud of.
Too many people neglect estate planning, so that when the time comes, children and family members must face the unpleasant task of determining who will get all of the things you spent your life accumulating. Many people assume that estate planning is only for the wealthy, but the truth is that even if your home isn’t expensive and you don’t have large investments, there are good reasons to consider making plans for your future.