It is important to learn as much as possible about estate taxes. Estate planning often comes down to dollars and cents. You have a lot to think about, such as the well being of your family, but it’s never easy to overlook the fact that money is at the center of many decisions.
As somebody creating an estate plan, you don’t necessarily have to concern yourself with this. After all, you will be gone when your heirs are left to figure this out. However, that is not the approach you want to take. Instead, you want to make decisions now that can save your loved ones money in the future. This is what estate planning is all about.
Here is how the IRS defines estate tax:
“The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.”
As you can see, the basics of the federal estate tax are pretty easy to understand. While you may now have a solid grasp on what this tax is, it doesn’t mean that you are in any better position to help your loved ones save money upon your death.
To ensure that you are on the right path, here are five estate tax related questions to answer:
- Will your heirs owe federal estate tax upon your death? This depends on many factors, primarily the amount of the estate. If you want to learn more about this, you will need to consult with a tax professional. This person can give you an outline of whether or not you will owe estate tax, based on how much you are receiving.
- Will your heirs owe state estate tax upon your death? Some states have their own estate and inheritance tax. Others, however, don’t assess this. You need to know how your state handles this, as you may find that you owe taxes in addition to those paid to the IRS.
For more information on this, visit the Tax Foundation website. There is a map that shows each state and its estate tax rate.
- What strategies can you use to help your heirs avoid estate taxes? There are steps you can take now that may be able to save your loved ones money in the future. Don’t hesitate to discuss these strategies with an estate planning attorney. You may be able to make some basic changes that help your family save big money.
- Have you discussed the possibility of estate taxes with your heirs?
- Have your heirs considered the fact that they may owe estate tax, thus giving them the opportunity to be prepared for this?
It is never fun to think about estate taxes. Not only do you have to consider the fact that you will one day pass on, but you also need to think about the financial impact it will have on your heirs. That is not exactly exciting.
Even so, if you put the right plan in place, you can feel better about what the future holds. You can make changes to your estate plan that will benefit you and your loved ones.
Have you downloaded our free report entitled “Fifteen Common Reasons To Do Estate Planning?” If not, now is a good time to do so. By reading this, you will gain a better understanding of why now is the best time to create an estate plan.
There are many reasons to take on estate planning, and you may not be fully aware of each and every one. If you want to learn more about this process, if you want to make sure you have all your details covered, this guide is a good place to start. It can help put you on the right track.