Estate Tax Planning is very important to preserving your wealth for future generations. Understanding your potential estate tax liability is a great place to start your estate tax plan.
American Taxpayer Relief Act of 2012
In January 2013, the President signed the A.T.R.A into law. For 2013, the estate exemption is $5,250,000 with a top federal estate tax rate of 40%. Amounts exceeding the exemption amount are taxed at a rate of 40%. The exemption amount is indexed for inflation for future years; however your exemption is reduced if you have used any gift exemption amount.
The new law, like the 2010 law that preceded it, allows an unused spousal exemption to be used by a surviving spouse. For example, if a married couple has an estate of $10 Million, and the first spouse uses $3 million of their exemption when they die, the second spouse is able to pass on $7,240,000 at the time of their death without incurring any estate tax (assuming an exemption of $5,250,000 per spouse).
Married couples never have to pay estate taxes on assets transferred to a surviving spouse. In addition, any assets transferred to a surviving spouse don't count against the estate tax exemption.
Large gifts distributed during your lifetime can reduce your estate tax exemption when you die. This can increase your estate tax bill. The tax code was designed this way to prevent wealthy individuals from giving away their entire estate before they die, thus escaping estate taxes. If you have never given a gift over $10,000, other than gifts to non-profit organizations or your spouse, then your used gift exemption amount is $0.
Strategies to Help Reduce Estate Taxes
If you're concerned about estate taxes, you can use a variety of strategies to help reduce your estate's tax bill, including:
- Credit shelter trust planning
- Transferring exclusion to your spouse - the "portability" election
- Annual gifting
- Life insurance
- Irrevocable life insurance trust
At Lauro Law, PLLC we will use our knowledge of Arkansas Estate Tax Law and our experience to answer your questions and assist you with this planning.
At Lauro Law, PLLC we take a special interest in every case and we will:
- Explain the Estate Tax Planning process and how we will facilitate that process
- Explain your rights and responsibilities
- Provide you with appropriate data and information gathering questionnaires
- Provide advice, guidance and reviews base on options available for your Estate Tax Plan
- Prepare the final Estate Tax Plan with supporting documents
Lauro Law, PLLC also provides advice, Estate Planning services and representation in: