How does the Estate Tax affect you?
Written by Amy   
Tuesday, 29 March 2011 19:01

The Estate Tax is a tax on your ability to transfer property upon your death. The tax is based on the fair market value of your estate at the time of death; in other words, it is based on the current value of the property – not what you paid for it or the value when acquired. Assets that will comprise your estate’s value for tax purposes (minus liabilities) include proceeds from life insurance policies, your primary residence and any vacation/rental properties; retirement accounts; investment accounts; cars, furniture, collectibles (i.e. art), and the rest of your belongings. Currently, law provides a generous $5 million tax exemption for estates of individuals who die in 2011 or 2012. Initially, it may be difficult to see how your total estate value could exceed the $5 million exemption, however, the exemption can be easily exceeded if you have lots of life insurance coverage, an expensive home, hefty retirement account balances, and some other assets. Further, the amount taxed on the assets exceeding $5 million isn’t modest – it’s a whopping 35%! If your life insurance policy is pushing you over the exempt cap, you might be okay if the beneficiary is a spouse. Life insurance death benefits can usually go to the surviving spouse federal estate tax free thanks to the unlimited marital deduction privilege. However, for those who list the beneficiaries as their children, siblings, or parents, they should consider seeking the legal advice of an attorney to plan for the administration of their estate that leaves them with the least tax liability. There are several ways to minimize estate tax exposure including tax free gifts, certain trusts (AB and QTIP), charitable trusts and irrevocable life insurance trusts. Give the office a call at 603.821.9052 for a free consultation regarding your estate planning needs.