Depending on how much you own when you die, your estate may have to pay estate taxes before your assets can be fully distributed. Estate taxes are different from, and in addition to, probate expenses (which can be avoided with a revocable living trust) and final income taxes (on income you receive in the year you die). Some states also have their own death/inheritance tax; you could be exempt from the federal tax and still have to pay state tax.
Federal estate taxes are expensive -- the rate is 45% in 2008 -- and they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. But estate taxes can be substantially reduced or even eliminated -- if you plan ahead.
Your estate will have to pay federal estate taxes if its net value when you die is more than the "exempt" amount set by Congress at that time. Here is the current schedule:
|Year of Death||Exemption Amount|
|2011 and thereafter||$1 million|
To determine the current net value, add your assets, and then subtract your debts. Include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans and death benefits from your life insurance.
Contact us today for your no charge initial consultation.