Effective estate planning can help you to minimize or completely avoid the federal estate tax, sometimes referred to as the "death tax". California presently does not have a state estate tax. Some professionals call the estate tax a “voluntary” tax because you only volunteer to pay it if you don’t sufficiently plan. You can avoid estate tax by: Creating a life insurance trust (ILIT) to own life insurance policies on your life. If you don’t own it, it’s not taxed at your death. … [Read more...] about Minimizing the “Death Tax”
Tax Avoidance
Small Business Owners: Don’t Forget to Plan
If you own a small business, you have plenty to think about on a daily basis. However, have you considered what would happen to the business upon your death. If the business has been successful, you also likely have a considerable financial interest in the business. Without careful planning, the value of your financial interest in the business can be subject to either gift or estate taxes upon your death. Although there are numerous options that may be used to help reduce estate or gift taxes, … [Read more...] about Small Business Owners: Don’t Forget to Plan
Confusion About How to Avoid Probate and Estate Taxes
Some consumers mistakenly believe that avoiding probate also avoids the federal estate tax. Both probate and the federal estate tax deal with your estate, but avoiding one doesn’t avoid the other. What is Probate? What’s the Federal Estate Tax? Probate is the legal proceeding of validating a will, if there is one, and settling an estate. Probate assets are all those assets that the decedent owned in his or her individual name, but didn’t have a beneficiary designation, a joint owner or … [Read more...] about Confusion About How to Avoid Probate and Estate Taxes
Estate Size and Living Trusts
A question that often comes up in estate planning is “How much money do you need to get a Living Trust?” The question is a fundamental misunderstanding, but a common one. Although there would not be much point in doing so, you can put as little as a single penny into a Living Trust. The question is based on the premise that Living Trusts are designed for rich people. It’s a false premise. Living Trusts are designed for anyone who either wants to give something for one person to manage for the … [Read more...] about Estate Size and Living Trusts
A Federal Estate Tax Lesson from a Surprising Source – Hooters
The federal estate tax can be reduced or even eliminated with advanced estate planning measures for any estate. In fact, the federal estate tax is a voluntary tax; if you don’t plan, you volunteer to pay it. Here is a memorable federal estate tax lesson from the owner of Hooters, the infamous restaurant chain. When Robert H. Brooks died, his family sold Hooters, in part, because was it worth approximately $250 million dollars and the estate tax, at that time, was 46% or $115 million … [Read more...] about A Federal Estate Tax Lesson from a Surprising Source – Hooters
Gifting Can Be Complicated
By now, most wealthy people know that the current gift tax exemption lifetime limit in 2022 of $12.02 million. This is in addition to the $16,000 annual gift exclusion per gift that is in effect in 2022. However, a good gifting plan is not as simple as just giving away the maximum amount of money that you can. Before gifting anything, you need to consider how much you can afford to give away. To know that, you will need to make an estimate of how much money you will need for your own … [Read more...] about Gifting Can Be Complicated
Decanting: It’s not Just About Wine
Decanting is a familiar process in winemaking as well as in chemistry. However, it is also a sophisticated process in estate planning. California recently passed legislation enabling it's use in the state. Question 1: What is decanting? Decanting is the process of transferring property from one trust to another. Specifically, the term applies when a trustee transfers property from one irrevocable trust to a new trust that has terms different than the original. Question 2: Why is … [Read more...] about Decanting: It’s not Just About Wine
Death Taxes Primer: Estate Taxes vs. Inheritance Taxes
It comes as a surprise to some people that there can be a tax imposed on your assets after you pass away. The extent of the taxation can vary depending on where you happen to reside in the United States. When you examine the facts you find that in California we are rather fortunate in this regard. To understand these taxes you have to know the difference between an estate tax and an inheritance tax. The estate tax is imposed on the entirety of the estate before it is passed on to the heirs. … [Read more...] about Death Taxes Primer: Estate Taxes vs. Inheritance Taxes
Flexible Estate Plans
Most of us can not plan when we will pass away. It could happen tomorrow or in 20 years. The inability to plan for when you will pass away can create problems for your estate. Because the estate tax changes almost every year, you need to have a flexible estate plan that can absorb those changes. If you die in early 2022, the estate tax only affects estates that are over $12.06 million. If Congress passes certain pending legislation, that might change. You really should not have to worry … [Read more...] about Flexible Estate Plans
A Primer on Gift Taxes in 2022
Both the gift tax and the $16,000 annual gift tax exclusion (in 2022) confuse nearly everyone. The bottom line is that in early 2022 you can give away way more than $16,000 without paying gift tax. In fact, most people could give away every penny they have and still not pay gift taxes. Here’s some tips on how to give away assets without paying gift tax. In early 2022, you can give away $16,000 per calendar year to as many people as you’d like. The annual gift tax exclusion is unlimited, … [Read more...] about A Primer on Gift Taxes in 2022
