People are often confused about the way that inheritances can be taxed. If you have heard the terms “estate tax” and “inheritance tax,” you may assume these are two different ways of describing the same thing. There are also those that think that the terms refer to the requirement to report inheritances as income when you file your regular tax returns. In reality, all of the above assumptions are mistaken, and we will provide clarity in this post. Income Taxes and Capital Gains … [Read more...] about Inheritance Tax vs. Estate Tax: Is There a Difference?
Before we address the question that serves as the title this blog post, we must provide the necessary background information. We have a federal estate tax in the United States, and it carries a potentially devastating 40 percent maximum rate. The good news is that most people do not have to pay this death levy, because there is a credit or exclusion that is quite high. This is the amount that can be transferred before the estate tax would become applicable. In 2020, the exclusion is $11.58 … [Read more...] about Can You Give Gifts to Avoid Estate Taxes?
One of the things that would naturally enter your mind when you are planning your estate is the question of taxation. Will your heirs be required to pay taxes on inheritances that you leave to them? For the most part, the answers are encouraging, but there is one looming threat to your legacy. The Good News Inheritances are not considered to be taxable income by the IRS, so an heir does not have to claim an inheritance on regular income tax returns. Another positive applies to the capital … [Read more...] about Will My Heirs Pay Taxes on Their Inheritances?
Where you die matters. While you’ll pay the same federal estate tax no matter where you die, 1/3 of the states have a separate estate or inheritance tax. The most populous state, California, is the latest state to consider adding a state estate tax. Read on to learn more. When and Where You Die Matters … [Read more...] about When and Where You Die Matters
A trust may be taxed as either a grantor trust or a nongrantor trust. Each type of trust has advantages and disadvantages. This article examines a grantor trust and situations in which it might be useful. Grantor Trusts Provide Flexibility and Ease … [Read more...] about Grantor Trusts Provide Flexibility and Ease
A lucky winner recently won $320 million in the lottery. This article looks at an example of a prior winner’s mistakes. The next article in the series will examine strategies for lottery winners. Planning for Lottery Winners, Part 1 of 2 … [Read more...] about Planning for Lottery Winners, Part 1 of 2
A lot of people are not aware of the fact that gifts that you give throughout your life are potentially taxable. We have a federal estate tax in place, and the gift tax prevents people from giving away their assets while they are still alive in an effort to avoid the estate tax. The two taxes are said to be "unified." As a result they both carry the same rate, which is 40% in 2013. The unified exclusion for 2013 was $5.25 million. This means that anything that you give away that exceeds this … [Read more...] about Don’t Forget IRS Form 709 to Account for Gifts
You have to concern yourself with the potential ravages of the estate tax if you have enjoyed a particular amount of financial success throughout your life. Everyone in all 50 states has the federal estate tax to contend with, and it carries a 40% top rate in 2013. There is also the Connecticut state estate tax to consider, and in 2013 it is applied to the resources that you leave behind exceeding $2 million. It makes sense to consider giving gifts while you are still alive to people who would … [Read more...] about Annual Gift Tax Exemption for 2013
One of the first things that you must do when you are planning your estate would be to inventory your assets. To be able to know what you are passing along to your loved ones you need to know exactly what it is that you have to give. The quantity of what you have is part of the equation, but you also have to understand the form of the assets that you have. Some of them are not going to be liquid. Some of your assets will have sentimental value to certain specific members of the family. Once … [Read more...] about Are You Exposed to Transfer Taxes?
It's easy to get kind of jaded about the commercial nature of the end-of-year holidays, and the idea of looking at the calendar and recognizing that it is time to shop for gifts can sometimes seem like more of a chore and less of a joy. But when the day comes when you are actually giving the gifts to your loved ones, all of that resistance melts away and you feel something ineffable. If anything people often kind of wish that they had another gift to give once that last one last one has been … [Read more...] about Tax-Free Gifts