Likely you are aware that comedy legend Joan Rivers died recently, as well as her wealth and fame. Living large, she also wanted to die "large" when it came to her funeral celebration. However, the teaching point of this blog is not about comedians, wealth and fame, or even large funerals.
The extravagant funeral arrangements of Joan Rivers sendoff aside, Forbes considers the event from a different perspective in an article titled "Saying Goodbye To Joan Rivers: The Bigger The Funeral, The Bigger The Tax Deduction?"
With her income from book royalties, appearance fees and salary at E! Television, plus sales of her QVC merchandise (may have exceeded $1 billion), Joan Rivers could afford a big farewell.
The Forbes article mentions that Joan Rivers would have liked the fact that expenses associated with her funeral are tax deductible for federal estate tax purposes. However, she likely would ask "Can We Talk?" regarding her estate being reduced by federal estate taxes in the first place. While no one is certain of the exact amount of her fortune, chances are better than even that her estate will be hit with some sizable estate taxes.
Closer to home, what if a loved one passes this year? The exemption is $5,340,000, which means federal estate taxes are due on estates over that amount. But remember, the estate may claim some deductions against the gross estate. One of those available deductions is for funeral expenses.
There is no dollar limit on the amount you can claim, but the deduction is limited to an amount “allowable under local law.”
Forbes notes that this basically means that you cannot claim more in deductions than you can claim in assets. Deductible expenses in this area include funeral home and burial costs, as well as church services.
Note: you may only claim the deduction on the federal estate tax return for funeral expenses—not on your personal income tax return. Talk with your estate planning attorney to learn more.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Forbes (September 7, 2014) "Saying Goodbye To Joan Rivers: The Bigger The Funeral, The Bigger The Tax Deduction?"