The Truth About Estate Taxes
Here’s the simple truth about estate taxes (AKA “Death Taxes”): very few people need to be concerned with them. Who does need to be concerned? Under current law, only those who have estates greater than $5 million. Here’s why:
Everyone who dies is subject to a federal estate tax of 40% of your wealth that is transferred at death. Fortunately, Congress has deemed fit to give each of us a coupon to apply against a portion of our wealth that would otherwise be subject to taxes. As of January 1, 2013 that coupon amount is $5 million, indexed for inflation. So, if I were to die in 2014, I could use my coupon against the first $5.34 million (indexed amount) of my estate to transfer to my loved ones free of taxes.
So why is there such a concern about estate taxes? Well, throughout the 90’s, the coupon amount remained in the $600,000 range. Therefore, a larger portion of the population then, as compared to today, would have been subject to paying tax on their estates. In turn, attorneys began creating strategies and techniques to combat these estate taxes. Suddenly, estate planning became simply tax planning, and the other goals that can be accomplished through good planning were either lost on the attorneys or never discussed with the clients.
Here is the unfortunate piece: because estate planning has been equated to tax planning for so long, when the curtain is pulled back to reveal the actual tax bill one faces, he or she becomes of the mind that they don’t need to do any planning. This is unfortunate because good estate planning can address so many goals besides saving taxes. Just to name a few: planning for disability, protecting your assets from creditors and predators (including divorced and remarried spouses), planning for the succession of your business, planning for special needs, etc.
Just a cursory look at only some of the issues estate planning can address will tell you that estate planning is not just for the “rich”. Most of us may not be subject to having to pay a tax on our estate (at least under the current law), but very few of us do not have issues that should be addressed through estate planning.
Do you know what my clients list as the number one reason for creating an estate? To make things easier on the ones they leave behind. That is what it almost always boils down to. And that can only be accomplished by engaging a counseling oriented, estate planning professional. Contact your Raleigh, North Carolina Estate Planning Attorney at 919-825-1518 today for an initial consult to learn how you can achieve peace of mind through estate plans that work.