Despite all the talk of "estate tax reform" in the United States, the combination of income tax and estate tax can consume 80% or more of your entire estate without proper estate planning at your death.
But the good news is, you can avoid these ruinous death taxes with several planning techniques.
More About Estate Planning
A Blueprint for Disinheriting the IRS: How to Use a Dynasty Trust to Leave More to Your Loved Ones and Less to the IRS
By Mark Nestmann
If you’re a U.S. person, and you have a net worth over US$1 million, then January 1, 2011 should be a red-letter day.
On that day, the U.S. estate tax exclusion will digress back to its 2002 level of US$1 million. Any estate worth more than US$1 million will be subject to estate tax at a maximum rate of 55%.
Think this doesn’t include you? Consider this: Everything you own, anywhere in the world, counts toward your estate. Your worldwide possessions are also valued at their “highest and best use,” which could bump you up into the “over US$1 million category.”
You can blame Congress for this war on inherited wealth. In 2001, Congress radically retooled federal wealth transfer tax laws. The amendments gradually raised the estate tax exemption amounts, lowered the top estate tax rate and eliminated the estate tax all together for 2010. But in 2011, estate tax rates will return — and they’ll be back to their extremely low US$1 million thresholds.
Congress has been playing a ridiculous game with your heirs’ wealth. It’s absurd, but unfortunately, it’s still the law. The good news is there are ways to reduce your estate tax responsibilities.
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Plan Your Estate from the Ground Up: Two New Estate-Planning Strategies to Save Your Loved Ones from Years of Tax Grief
By Mark Nestmann
In 1789, Ben Franklin wrote to French scientist Jean Baptiste Leroy, “Our Constitution is in actual operation; everything appears to promise that it will last; but in this world nothing is certain but death and taxes.”
In regards to death and taxes, nothing has changed in over two centuries. The only thing that has changed is nations have found a way to combine these two inevitable truths.
Imagine what old Ben would have said if knew that a couple hundred years later you would be taxed for dying. In fact, if you’re not careful, today your heirs could be taxed hundreds of thousands or even millions of dollars at your death.
This is why estate planning is so important. You should seek out a qualified estate-planning attorney to set up a plan if you are a U.S. citizen or resident and the total value of your estate — everything you own priced at fair market value — exceeds US$1 million.
Even if your estate is under US$1 million, you should still review your plan to ensure that your assets will pass to your intended beneficiaries after your death.
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Put Your Worries to Rest: 4 Ideas to Get Your Estate in Order
by Erika Nolan
What happens if you DON'T plan your estate?
Say you procrastinate until the relatively young age of 47. You're in perfect health so you keep telling yourself "47 is the new 37...I have plenty of time."
Then tragedy hits. Whether it was a car accident or a sudden aneurism, the result is the same. Your family is left without you.
On top of their grief, your family also must cope with the mess of the unplanned estate you left behind. Assuming your business and other assets (or your "gross estate") are worth more than US$2,000,000, your family will be stuck with a considerable tax burden. In fact, your family could have to hand over 80% of your total estate just to pay income and estate taxes. That's quite a chunk.
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