Avoiding the Estate Tax

Benjamin Franklin has been famously quoted as saying: "In this world, nothing is certain but death and taxes." In many ways, the federal estate Oklahoma truck accident attorneys is a vivid illustration of Franklin's somewhat pessimistic statement. Simply put, the estate tax is a tax which is assessed against the total value of a deceased person's estate.

Currently, the estate tax stands at a whopping 45% - this means that nearly half of a decedent's estate, minus exemptions, will be taken by the Internal Revenue Service. It's no surprise that many people are interested in avoiding estate taxes as much as possible. The good news is that New York motorcycle accident attorneys are several perfectly legal ways to do so by using some creative estate planning in conjunction with the exemptions set by the government itself.

Estate Tax Exemptions

Under IRS statutes, there are three main exemptions to the estate tax. To begin with, each estate is allowed a $2 million exemption on virtually all assets and property. This means that any estate with a value lower than $2 million pays no taxes, while an estate worth, say, $5 million, would only be subject to taxes on $3 million. This makes a huge difference in the total amount of taxes your estate is forced to pay. In addition, under the current laws, this standard exemption is scheduled to increase from $2 million today to $3.5 million in 2009. The bad news? The law is expected to change in 2010, reducing the exemption to a paltry (by comparison) $1 million.

Second, a tax exemption is granted to the estate in the amount of any property, assets, or cash passing from the deceased to his or her spouse. Therefore, if a husband dies and leaves his entire estate to his wife, no estate tax will be due. Furthermore, a similar exemption is granted for any donations made to a qualified charity organization. In other words - leave your estate to your spouse or a charity, and estate taxes are avoided.

One important fact to note is that the standard $2 million exemption and the spouse and charity exemptions are not mutually exclusive; that is, an estate can take advantage of all three, if planned correctly. For example, the husband from our previous example could choose to only pass $3 million on to his wife, and put the remaining $2 million into a trust fund. How much estate tax is owed? None, because the first $3 million claims the spouse exemption, while the remaining $2 million can pass under the standard exemption. Such an arrangement allows much more flexibility in estate planning - good news for us all.

For more information on estate taxes, consult the resources on the website of Austin probate lawyers Slater & Kennon, LLP, at http://www.probatelawyeraustin.com

Joseph Devine