June, 2009 – How Does the Estate Tax Affect Your Wealth Transfer Plan?

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BY THE NUMBERS

by Juan Cocuyjuan-km1

 

How Does the Estate Tax Affect Your Wealth Transfer Plan?

Anyone with significant net worth must consider tax rates and the threshold at which wealth transfers are taxable.

If your estate is currently valued at less than $3,500,000 and is not expected to increase substantially any time soon, changes in estate tax rates and exemptions won’t mean much to you. But for persons with larger estates, current law offers significant but perhaps temporary tax breaks through phased rate reductions and increases in exclusion amounts.

The amount you can leave to your survivors free of estate tax is $3,500,000 in 2009. In 2010, the federal estate tax is scheduled to be repealed but, in 2011, it is supposed to go back to the $1,000,000 exemption with a top rate of 55%.  The common joke is if you are going to die, schedule it for 2010.  Currently, the amount that can be transferred free of gift tax by lifetime giving is $1,000,000 and will not increase. The maximum wealth transfer tax rate on taxable amounts is 45 percent. Also, you can gift $13,000 per year not included in the lifetime giving amount.

Spouses are permitted to join in any gift by the other spouse for the purpose of calculating the tax-free limit.

That means that, currently, a married couple could transfer up to $9,000,000 free of wealth transfer tax – which would include inheritances totaling $7,000,000, plus lifetime tax free gifts of $2,000,000, both significantly more than current limits. But again, it is preposterous to plan that both to die in 2009!

Never in our memory has planning for wealth transfer been more confusing and uncertain. That’s why we advise that, if you are in a high net worth situation and are up in years, you should consult your CPA and other advisors on how to plan your estate to cover the bases.  As always, if you have any questions about these or other issues, please call us.

 

Juan Cocuy, CPA

 

About Cocuy, Burns & Co., P.A. Located at 12400A South Shore Boulevard, Cocuy, Burns & Co., P.A. is the only full-service CPA firm in the western communities. We have been in business for over 20 years and provide a full menu of services to the professionals and businesses in our area including tax compliance and planning, auditing and consulting. We can be reached at 561-793-1927 or by visiting www.cocuyburns.com.