Estate Planning and Tax Consequences

One common facet of estate planning for everyone, however, is the need to take into consideration the potential tax consequences of Estate Planning Attorney great neck. Both estate taxes and/or gift taxes can reduce the assets in your estate by as much as 55 percent without careful estate planning ahead of time. A basic understanding of how estate and gift taxes operate can help you see the need for thorough estate planning.

• Estate Taxes: When you die, your estate assets must be inventoried and valued as of the date of death. The sum total of all estate assets is then potentially subject to estate taxes. Your estate may take advantage of the current exemption amount that applies to all estates. The exemption amount fluctuates each year. For 2012 the exemption amount is $5,120,000 — an all time high. For 2013, however, it is set to return to $1 million unless Congress passes a new tax law. All assets above the exemption amount will be taxed. The tax rate also changes each year as a result of the changes in the federal tax laws passed by Congress. Although the tax rate for 2012 is at 35 per cent, that, too, is scheduled to increase to 55 percent for 2013 unless Congress acts. Unfortunately, there is no way to know when you will die or what the current exemption amount or tax rate will be. Planning for the worst case scenario is best.

• Gift Taxes: In the event you are thinking that gifting your estate assets prior to death may be the answer to avoiding estate taxes, think again. Gifts are also taxed if they are above the lifetime exemption amount. These amounts, like the estate exemption and tax rate amounts, are also subject to change on a yearly basis as federal tax laws change. Gift tax rates have historically been between 35 and 55 percent with the lifetime exemption amount around $1 million. That amount is much higher for 2012. Gifts that do not qualify for the yearly exclusion or lifetime exemption will be taxed at the current gift tax rate.

The complex and ever changing tax laws is just one more reason why smart consumers will work with an experienced and qualified estate planning attorney to plan their futures. There is no way that self help trusts available in form books or websites or even so-called non-lawyer living trust mills will contain the up to date critical tax planning provisions that you will get in a comprehensive plan prepared by an experienced and qualified attorney.