For Mark Roberts’ Use: As the old saying goes, nothing is certain except death and taxes. And while no one loves discussing either of those topics, they both require some advance planning. In particular, once you pass away, your estate could be subject to the estate tax. And because you would probably prefer to leave those assets to your loved ones, rather than Uncle Sam, considering the impact of taxes is an important part of financial and estate planning.
The estate tax, also known as the “death tax”, dates all the way back to the Stamp Tax of 1797. The estate tax has remained controversial throughout American history, and has been repealed and reinstated at various times due to political pressure. Our current estate tax was established in 1916 by the Revenue Act, and is currently in effect (but still not very popular).
So what happens to your estate when you pass away? The entire value of your estate, including all stocks, bonds, real property, and so on, will be assessed. Then certain deductions are taken for debts and administrative expenses. A certain part of your estate is excluded from taxation, so that amount is subtracted, and the remaining value of estate will be subject to the estate tax.
In fact, the words “value of the estate” are important to remember here. Even if you don’t have much liquid assets sitting in the bank, the value of items like real estate could trigger hefty taxes. In some cases, the taxation could wipe out the liquid assets you intended to leave your heirs, and they could be forced to sell some assets in order to pay taxes on the estate.
You – or rather, your estate – could pay up to 40 percent in taxes upon your death. But Congress frequently changes the tax code, allowing for various deductions and exemptions, so it’s important to work closely with a financial planner to stay on top of current guidelines and protect your estate from excessive taxation. We have various strategies to help you shelter your estate. Call us to schedule an appointment, and we can review your current estate plan to ensure that your assets are well protected.