Estate Planning

Estate Planning

You need "will power"

Do you need to worry about estate or inheritance taxes?

Brief look at how to reduce estate taxes

You need "will power"

Two-thirds of Americans die without a will (i.e., die intestate)

If you die without a will, state law will dictate how to distribute your assets

You may not agree with what the state has in mind

Example

All your money might go to your parents

Any kind of will, even one written on boilerplate sheets, is probably better than dying intestate

Just make sure the will is properly signed and witnessed

Your will should define guardianship issues

Do you need to worry about estate or inheritance taxes?

Inheritance taxes versus estate taxes

• Inheritance taxes are paid by surviving beneficiaries
• Estate taxes are paid by your estate

There are no federal inheritance taxes

• There are federal estate taxes
• Some states have inheritance taxes

You should worry about federal estate taxes if your net worth is more than $600,000

• Includes your home and any life insurance in your name
• Marginal rates on estate taxes begin at 37 percent and top out at 55 percent!

Brief look at how to reduce estate taxes

You can pass an unlimited amount of money to your surviving spouse without federal estate taxes

But the estate will be hit with taxes after surviving spouse passes away

You can reduce the size of your estate by making annual gifts to beneficiaries

You and spouse can each give $10,000 each year to an unlimited number of people gift-tax free

Both you and spouse can each pass $600,000 estate-tax free by setting up a bypass trust (sometimes called an A-B trust)

This is one area where it probably pays to get some expert advice