| Services |
|
|
|
|
 |
|
| News |
|
|
|
|
|
|
|
|
|
| Channels |
| Home & Family |
|
|
|
|
|
|
|
| Leisure |
|
|
|
|
| Technology |
|
|
|
|
|
| Business |
|
|
|
|
| Science |
|
|
|
|
|
|
|
|
|
|
Site Search  |
|
|
|
|
| Free email |
|
|
|
|
 |
What's Next for Estate Taxes? |
| ARA Content |
(ARA) – With President Bush back in office for four more years, people who've been thinking about estate planning are breathing a sigh of relief. Mr. Bush, after all, ran on a platform promising to end the "death tax."
But as Mike Halloran, a director with the National Association of Estate Planners points out, it's not a done deal yet, so people need to take the time to properly plan their estates, taking into account the present laws and proposed changes.
Under the current legislation, "The Economic Growth and Tax Reform Reconciliation Act" President Bush signed into law in 2001, the first $1.5 million dollars of an estate is tax exempt in 2005. The tax exempt amount increases to $2 million for 2006 and $3.5 million in 2009 before being repealed, or ended altogether in 2010. But then, unless new legislation is passed, it will return to the original $1 million in the year 2011.
"The President wants to make the repeal permanent to allow family farms and businesses to be passed from one generation to the next without having to break up or sell the assets to pay a punitive tax to the federal government. But in order for that to happen, he has to get 60 votes in the Senate. With the body's current make-up, there's no guarantee that will happen," says Halloran. Right now there are 55 Republicans, 44 Democrats and 1 Independent in the Senate.
"Unless you know for sure you're going to die in 2010, the year there will be no death tax, you need to have a plan in place to protect your assets," Halloran adds. "Plan your estate or plan on giving a good chunk of your estate to the federal government."
To understand how important protecting your assets really is, Halloran offers this example: If you die this year and leave an estate of $10 million to your heirs with no protection, the first $1.5 million dollars worth of assets will be excluded from your taxable estate. The next $2 million will be taxed at a rate of 45 percent; the remaining $6.5 million will be taxed at 48 percent. Do the math and you'll find that the federal government stands to gain $4,020,000 just because you died -- a whopping 40.2 percent of your estate.
However, if you plan your estate using an irrevocable life insurance trust and credit shelter or family trust, you'll be doing your heirs a big favor. With an irrevocable life trust, the trustee owns a policy on the life of one or more parents. When they die, the trustee pays the estate tax with tax-free proceeds from the policy. The full value of the estate is preserved and the heirs get what the benefactor intended them to get.
A credit shelter or family trust achieves a similar result by minimizing or eliminating the estate tax at the death of the surviving spouse. When the couple sets up their estate plan using the credit shelter trust, they would put $1.5 million of assets into a trust for the surviving spouse for life, which qualifies for the exclusion of those assets from taxation at both deaths. The children inherit their trust assets tax-free at the death of both parents.
Using our above example, we double the exemption and reduce the taxes by $720,000 and $1,200,000 if a $1 million life insurance trust is used.
"People may think they won't have to worry about these things now that President Bush is back in office, but with the deficit growing by leaps and bounds every day, the money to make up for it has to come from somewhere and the estate tax is one place. If you don't want it to be your pocket, or your kids' pockets, make an appointment with an Accredited Estate Planner and get your affairs in order," says Halloran.
To learn more about estate planning, contact The National Association of Estate Planners and Councils (NAEPC) at (866) 226-2224.
|
| About the Author |
©2005 All rights reserved
Courtesy of ARA Content
|
|
|
| Quotes | A smart man covers his butt, a wise man simply leaves his pants on.
C.D. Bailey
Figures wont lie, but liars will figure.
General Charles H. Grosvenor.
First you will know pain. Then you will know fear. Then you will die.Have a nice flight.
Gkar, on Babylon 5
|
| Writers | | If you are a writer and want to see your article published at Theallineed.com, just click here to submit. |
|
Schedules for the Beijing 2008 Olympic Basketball Tournaments Announced
Are cell phones and ipods perils for pedestrians?