For the most part, the news is good when it comes to taxes on inheritances. You do not have to claim a direct inheritance on your regular income tax returns, and this includes insurance policy proceeds. Inherited appreciated assets get a stepped-up basis. The person inheriting the asset is not responsible for gains that accumulated during the life of the decedent. They would be on the hook for future appreciation if and when they realize a gain. On the bad news front, there are estate … [Read more...] about Connecticut Estate Tax Exclusion Has Been Increased for 2021
The federal estate tax targets people that have been particularly successful from a financial standpoint. There is a relatively high exclusion, and you don’t have to pay the tax if the value of your estate does not reach this threshold. To understand the place we are at right now, you have to absorb a bit of a back story. Path to the Current Exclusion In 2009, the federal estate tax exclusion was $3.5 million, and the maximum rate was 45 percent. There was a complete repeal in 2010 that was … [Read more...] about 2021 Estate Tax Exclusions Have Been Set
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