Law Offices of Jesse H. Smith
ATTORNEY AT LAW, LL.M.
Services
Estate planning is as important as ever. For assistance with your planning, contact us. We offer:
- Probate / Estate Administration
- Living Trusts
- Wills
- Elder Law
- Nursing Home Planning
- Asset Protection
- Charitable Planning
- Free Consultation
Do You Still Need to Plan?
The Economic Growth and Tax Relief Reconciliation Act of 2001 made major changes in the estate and gift tax laws. In considering your planning needs, you’ll want to review the current rules. Here are the highlights.
>>There is no longer a 5% surtax on estates over $10 million.
>>In 2010, the estate tax and the generation skipping tax are repealed, but the gift tax is retained with both the annual exclusion and a $1 million lifetime exclusion. The top gift tax rate after 2009 will be the same as the top individual income tax rate (35%).
>>The current step-up in basis for property acquired from an estate will end when the estate tax is repealed. In its place will be a basis step-up for a limited amount of assets. Executors of an estate will be able to increase the basis of certain estate property by up to $1.3 million, or to $4.3 million in the case of property passing to a surviving spouse. Other property will generally retain or “carry over” the basis it had in the hands of the decedent.
>>Effective in 2004, the special estate tax deduction for qualified family-owned businesses is repealed.
>>In 2010, the income tax exclusion of gain on home sales is extended to estates and heirs.
>>Though estate tax returns will no longer be required once the estate tax is repealed, there will still be certain IRS reporting required to document the carryover basis of inherited property.
>>The state death tax credit is gradually reduced and becomes a deduction rather than a credit after 2004.
>>The 2001 law included a sunset provision which restores a one-year repeal in 2010. Unless Congress acts to change that, the estate tax will return in 2011 with a 55% top rate and a $1 million exemption.
So what should you do now? Though eliminating the estate tax would seem to also eliminate the need for estate planning, the reality is that between now and 2010, high estate taxes still exist. Depending on your individual situation, you may need to take action now to minimize estate taxes while awaiting repeal. For example –
>>Check for flexibility in the wording of your estate documents – will, trust, etc. Pay particular attention to formula clauses relating to the exemption amount. As this amount increases over the years, be sure your documents will continue to accomplish what you intended.
>>Get your recordkeeping in order. If the estate tax is repealed and carryover basis becomes a reality, heirs will need to know your basis (cost) in property you leave to them. Poor records could mean higher income taxes for your heirs.
>>If your estate is large enough, consider making gifts to utilize both the annual and the lifetime gift tax exclusion.
>>Be sure you and your spouse will each be able to utilize the exemption amount if needed to cut taxes. You many want to transfer property between you or establish trusts to accompany this.
Remember, too, that taxes are just one part of estate planning. You still need a will to designate how your assets (excluding those assets that have named beneficiaries or are held jointly with right of survivorship) will be distributed upon your death. Your will should name a guardian for any minor children and trustees for assets they will inherit.
Two other documents are advisable. A durable power of attorney will allow another person to make financial decisions on your behalf if you become incapacitated. A medical directive or living will will give your instructions for medical treatment if you become too ill to state them yourself.
If you’re a business owner, estate planning is still a must to ensure that your business will pass to your heirs as smoothly as possible.
Please complete the worksheet below to begin your own estate plan. List your assets, their estimated value, and how title to them is held. Attach additional sheets if necessary.
Bring this worksheet – in any stage of completion – to our office, and let us give you and estimate of the estate taxes that would be due on your estate. We can also review with you the planning techniques that are most appropriate in your particular situation.
Law Offices of Jesse H. Smith
ATTORNEY AT LAW, LL.M.
Located at 1489 W. Warm Springs Road, Suite 110
Henderson, NV 89104
(702) 387-8886
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