Seminole Estate Tax Planning Lawyer
Under the tax law enacted in 2001, whatever you own (known as your "gross estate") is subject to the federal estate tax upon your death, until 2010. For the year 2010, estates will be entirely free from federal taxation. However, the law that includes this provision expires at the end of 2010. Thus, unless Congress acts in the interim, the estate tax rules will then revert to those prevailing in 2002.
For 2006, the tax rate on estates is 46 percent. Between 2006 and 2009, the top tax rate will gradually be lowered to 45 percent (see box below).
That said, not all estates will be taxed while the estate tax is in effect. First, spouses can leave any amount of property to their spouses, if the spouses are U.S. citizens, free of federal estate tax. Second, the estate tax applies only to estates valued at more than $2 million in 2006 and this threshold will increase incrementally until it reaches $3.5 million in 2009 (see box). Third, gifts to charities are not taxed.
Florida, like many states, does not have an estate or inheritance tax to speak of.
Tax Year Tax Rate Exemption Equivalent
|
Tax Year |
Tax Rate |
Exemption Equivalent |
|
2007 |
45% |
2,000,000 |
|
2008 |
45% |
2,000,000 |
|
2009 |
45% |
3,500,000 |
|
2010 |
N/A |
N/A |
One simple way you can reduce estate taxes lives in the form of annual gifts. You (and your spouse) are allowed to give up to $12,000 per year ($24,000 per couple) to any one person. Thus, having a large family may eliminate the need for advanced estate tax planning. There is no actual limit on how much you may give during your lifetime, but if you give any individual more than $12,000 (in 2007), you must file a form 709 gift tax return reporting the gift to the IRS. Also, the amount above $12,000 will be counted against a $1 million lifetime tax exclusion for gifts.
The $12,000 figure is an exclusion from the gift tax reporting requirement. You may give $12,000 to each of your children, their spouses, and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS. In addition, if you're married, your spouse can duplicate these gifts. For example, a married couple with four children can give away up to $96,000 (2007) with no gift tax implications. In addition, the gifts will not count as taxable income to your children (although the earnings on the gifts if they are invested will be taxed).
To schedule an initial consultation to discuss estate tax planning, call us at 727.475.6680 or contact us online any time.
