While a good number of states have some form of estate or inheritance taxes, only about one percent of Americans are now subject to federal death taxes. So, with estate protection from estate taxes now less of a concern, many Americans are engaging in estate planning to protect their loved ones from the estate they will inherit.
So-called “death tax” rates have been the subject of much debate, reform, and repeal over the past 15 years.
However, tax rates of all stripes have been unreliable, so it is hard to use them with confidence when looking at a long-term estate plan.
A recent Forbes article, titled "Estate Planning Fears That Keeps Us Up At Night," explains what this means.
For example, from 2001 to 2010, federal estate tax rates fell until they were eliminated in 2010, but were reinstated the next year and made permanent last year when Congress set a 40% rate on estates in excess of $5 million.
By the way, this $5 million is not static, but is inflation-adjusted. For example, for 2014 it is $5.34 million and will be $5.43 million for all of 2015.
In addition, there are now 15 states and the District of Columbia that impose their own estate tax—with six states also imposing an inheritance tax. Some states have raised their exemptions to be more in line with the federal level or have eliminated their inheritances tax altogether.
So what does this mean to you?
Well, the original article says this is a win for parents who want to leave their children, other heirs, and charities as much as they are able. On the other hand, many people are most concerned whether the wealth they have and pass on to their heirs is going to help those individuals or make matters worse.
T. Boone Pickens, patron saint of Oklahoma State University, has said publicly that he does not intend to leave all his money to his children.
“I’m not a big fan of inherited wealth,” Pickens has said. “It generally does more harm than good.”
This is why it is so important to work with an experienced estate planning attorney.
He or she can custom design an estate plan with the best interests of both you and your loved ones in mind.
As the original article notes, money matters in estate planning. As new tax rates become effective, it is a good time to sit down with your estate planning attorney.
Even more important than taxes, though, your attorney can provide creative solutions so your estate can support your beliefs, philosophies, and charitable intentions—and help prepare your heirs to accept and sustain it.
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 (October 29, 2014) "Estate Planning Fears That Keeps Us Up At Night"