As you go through the estate planning process, you need to think about how your loved ones will be impacted once you are gone. For example, will they be responsible for paying any estate taxes?
The same question needs to be answered if you are in line to receive any type of inheritance after somebody passes on. While it goes without saying that this is a difficult subject to think about, there will come a time when you need to have a clear understanding of Wisconsin estate taxes and how you will be impacted.
Federal and State Estate Tax
Many people are confused in regards to estate tax, regardless of where they live, because they don’t understand that there could be both a federal and state tax that impacts them.
Thanks to the American Taxpayer Relief Act of 2012, which made permanent changes to the federal estate tax system, the Wisconsin estate tax has been eliminated altogether.
The Wisconsin Department of Revenue explains this in greater detail, noting the following:
“2013 Wisconsin Act 20 further clarifies that, unless federal estate tax law is modified to provide a federal estate tax credit for state death taxes, Wisconsin does not have an estate tax for deaths occurring after December 31, 2012. Under prior federal and Wisconsin law, there is no Wisconsin estate tax for deaths occurring between January 1, 2008, and December 31, 2012. The federal estate tax did not have a credit for state death taxes upon which Wisconsin could impose an estate tax.”
Although this has helped clear the air, to a certain extent, it’s important to realize that there are still a variety of questions to answer.
For example, just because the state estate tax is gone does not mean you can ignore your responsibilities on a federal level. Along with this, there are other taxes that must be paid. These include but are not necessarily limited to the following:
- The final individual income tax return of the person who passed on.
- The estate income tax return, as long as the estate had more than $600 in income.
- Any property or real estate taxes owed by the deceased at the time of death.
What About Probate?
Along with matters of tax, you may have questions in regards to what does and does not go through probate. This is based on a variety of details, including whether or not the person had a trust or will.
Some of the assets that will go through probate include:
- Stocks and bonds held solely by the deceased
- Any bank accounts without a co-owner
- Home or homes owned solely by the deceased
- Tangible personal property, such as cars, furniture, and clothing
There are also items that can pass through probate entirely, including the following:
- Homes or land owned as joint tenants
- Bank accounts with a valid payable on death document
- Life insurance policies with a designated beneficiary
- Retirement accounts with a designated beneficiary
Note: any property held in a revocable trust is not subject to probate. This is one of the primary benefits of a trust as compared to a will.
The Right Strategy
As you create your estate plan, it’s essential to address questions regarding Wisconsin estate taxes and other related details. This will allow you to make informed and confident decisions that can benefit you and your loved ones.
Those who tackle estate planning on their own often run into questions and concerns, never knowing if they are making the right decision. To protect against this, it’s often in your best interest to consult with an experienced estate planning attorney.
Before you do so, however, don’t hesitate to read our free report entitled “Dangers of Do-It-Yourself Wills and Living Trusts.”
With this information on your side, you will have a better idea of why you should turn to a professional for estate planning. You may be tempted by a do-it-yourself will or living trust, but the risks far outweigh the benefits.
Now that you better understand estate taxes, probate, and other similar subject matter, you should feel better about your ability to make the right decisions in regards to your estate plan.