Preparation Is The Key
Author: Keith Huggett
While the newspapers are awash with discussion of the fiscal cliff and the looming tax increases that could potentially occur on Jan. 1, 2013, there are even potentially larger issues coming with the estate tax. Barring congressional action, the top rate will return to 55 percent and the maximum exemption will drop down to $1,000,000. Regardless of what happens, good estate planning strategy is key. Here are five tips to help you plan your estate and minimize your taxes:
- Marry your companion if you have not already done so. Transfers between spouses are usually tax-free. This can also protect your spouse's right to your assets.
- Write a will. While a will won't necessarily shelter you from taxes, it will help to ensure that your assets go to the correct heirs. Working with an estate planning expert to set up trusts can be an even better way to ensure that your money goes where you want as well as to potentially avoid some taxes.
- Take full advantage of your tax-free gift provision. Right now, you can give $11,000 per year tax-free. Gifting funds while you are alive takes money out of your estate and reduces the amount that might be subject to estate tax.
- If you own a business that you will be leaving to your heirs, consider letting them buy stock in the business before you pass away. You may even be able to lend them the money that they use to buy the stock.
- Plan for the basis set-up. When your assets transfer to your heirs, their basis gets stepped up to the fair market value based on the time that you pass away without your heirs having to pay capital gains taxes. With this in mind, consider holding onto your most highly appreciated assets to leave to your heirs while selling assets that are less appreciated when you need cash for your lifestyle.
Estate planning is extremely complicated, especially with the tax code in flux. The tax experts at The Tax Office, Inc. keep tabs on the evolving tax code and can share the best estate planning strategies with you.
