For 2014 the federal estate tax exemption is scheduled to be $5,340,000, which was an increase based on inflation from the exemption amount of $5,250,000 in 2013.
As of this writing in 2012 the estate tax exclusion is $5.12 million. So, if the overall value of your estate does not exceed this figure it is not going to be subject to the federal estate tax. However, if you are breathing a sigh of relief you may want to continue reading.
This arrangement is only in place through the end of the year. In 2013 the estate tax exclusion amount is going down to a mere $1 million, and the rate of the tax will shoot up to 55%. The maximum rate of the federal estate tax is 35% in 2012.
There are over 8 million households in the United States with resources in excess of $1 million so this is something that is going to affect many individuals.
It is important to recognize the fact that the value of your home does indeed count as part of your taxable estate. There are those who could escape estate tax exposure if they could reduce the taxable value of their homes. This could potentially be done through the creation of a qualified personal residence trust.
Simply put, you divest yourself of personal ownership of the home by placing it into the trust. It is then no longer a part of your estate though you can continue to reside in the home for a predetermined period of time.
Funding the trust is considered to be a gift to the beneficiary that is taxable But, the value of the home for tax purposes will be well less than its true fair market value because of the interest that you will retain in its while you continue to live there.
Should you be interested in discussing the possibility of placing your home in such a trust don’t hesitate to pick up the phone to set up an appointment to speak with a good Hartford estate planning lawyer.