A grantor retained annuity trust is an irrevocable trust that could be part of your tax efficiency strategy if you are a high net worth individual who is exposed to the federal estate tax. Before we get into the details, we have to provide some background information about the estate tax so that you can [ ] The post This Irrevocable Trust Can Provide Estate Tax Efficiency appeared first on Nirenstein, Horowitz & Associates P.C..
Many people have heard of estate taxes, and you may assume that an estate tax and an inheritance tax are the same thing. In fact, these are two different forms of taxation. In this post we will explain exactly who must pay inheritance taxes, and we will also look at the differences between an inheritance tax and an estate tax. Inheritance Tax An inheritance tax is levied on each individual asset transfer. If you named five different nonexempt inheritors in your last will, an inheritance tax could be levied on transfers to each respective heir. The good news is that there is no inheritance tax on the federal level, though there is an estate tax. Most of the states in the union do not impose inheritance taxes either, but there are a few states that do levy state-level inheritance taxes. Our firm practices law in the state of Connecticut, and there is no state-level inheritance tax in our state. For your information, the states that have state-level inheritance taxes are Maryland, Iowa,
There are many things to take into consideration when you are planning your estate, and there are those who make mistakes that yield negative consequences, because they do not know all the facts. This certainly comes into play when it comes to taxation, especially in the state of Connecticut. You pay taxes all of your life, on virtually everything: your property, your purchases, your income, your capital gains, hotel rooms, gasoline, etc., etc., etc. It would be logical to assume that you can pass away free of taxation, but in many instances, this is not the case. In this paper we will look at taxation as it applies to your surviving spouse. Federal Estate Tax and the Marital Deduction We have a federal estate tax that is applicable in all 50 states. This tax carries a 40 percent maximum rate, so it can take a heavy toll on the financial legacy that you are leaving behind to your family members. The existence of the tax is the bad news; the good news is that there is an unlimited mari
Since the end of the year is right around the corner, government agencies are releasing updated figures for 2016 that are relevant to people who are concerned about elder law and estate planning issues. Recently, the Internal Revenue Service released the amount of the inflation adjustment that will be applied to the federal estate tax exclusion. The exclusion is the amount that you can transfer before the estate tax would be applied. There is an unlimited marital deduction that you can use to transfer unlimited assets to your spouse tax-free, but transfers to others are potentially taxable. For the 2010 calendar year, there was no estate tax at all, because it was repealed for that one year due to provisions that were contained within the Bush era tax cuts. The estate tax was scheduled to return in 2011 with a $1 million exclusion. At the end of 2010, a piece of legislation that is now called The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was enac
There are certain estate tax efficiency strategies that are particularly viable when favorable circumstances exist. When it comes to transferring appreciable assets at a tax discount, the legal device called a grantor retained annuity trust can be quite useful when federal interest rates are low. Before we get into the details, we should provide some information about the estate tax parameters so that you can determine whether or not you are exposed to the federal death tax. Anything that you transfer to anyone other than your spouse is potentially subject to this tax. Transfers between spouses are not subject to transfer taxes, as long as the people in question are American citizens. When it comes to transfers to others, there is an estate tax exclusion. This is the amount that you can transfer to people other than your spouse free of taxation. Only the portion of your estate that exceeds this amount would be taxable. In 2015, this exclusion stands at $5.45 million. There is a gift t
People who have been able to accumulate significant wealth are undoubtedly aware of the potential imposition of estate taxes. On the federal level, the estate tax carries a 40 percent top rate, and this is a very big slice. The existence of this tax is especially disturbing to many people, because they see it as an instance of double taxation. After all, your estate is comprised of assets that you have left after you paid taxes all of your life. Why should a legacy that you are leaving to your loved ones be hammered down by 40 percent after you already paid so many taxes? This question is a good one, and there have been legislative efforts to eliminate the estate tax. However, it is a fact of life at the present time. On the federal level, the exclusion is $5.45 million. The portion of your estate that exceeds this amount is subject to the estate tax. The gift tax prevents you from giving gifts while you are living to avoid the death tax. The $5.45 million exclusion encompasses gifts
There is a federal gift tax in place that is unified with the estate tax, but there are exclusions that can be used to give tax-free gifts. You can give up to $14,000 each calendar year to an unlimited number of people tax-free, and you can also pay for school tuition and medical expenses free of the gift tax. Topics covered in this report include: Annual Per Person Exclusion Educational Exclusion Medical Gift Tax Exclusion Unified Lifetime Gift and Estate Tax Exclusion Click here to read the whole article or download the PDF.