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Serving Philadelphia, Delaware County, Montgomery County, Bucks County and Chester County since 1996.
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Taxation and Estate Planning
Estate Taxation
Under the tax law enacted in 2001, whatever you own is subject to the federal estate tax upon your death, until 2010.
For the year 2010, estates will be entirely free from federal taxation. However, the law that includes this provision expires
at the end of 2010. Thus, unless Congress acts in the interim, the estate tax rules will then revert to those prevailing
in 2001.
That said, not all estates will be taxed while the estate tax is in effect. First, spouses can leave any amount of property
to their spouses, if the spouses are U.S. citizens, free of federal estate tax. Second, the estate tax applies only to estates
valued at more than $2 million in 2006 and this threshold will increase incrementally until it reaches $3.5 million in 2009.
The federal government allows you this tax credit for gifts made during your life or for your estate upon your death.
Third, gifts to charities are not taxed.
Making Gifts: The $12,000 Rule
One simple way you can reduce estate taxes is to give some or all of your estate to your children (or anyone else) during
their lives in the form of gifts. Certain rules apply, however. There is no actual limit on how much you may give
during your lifetime. But if you give any individual more than $12,000 (in 2006), you must file a gift tax return reporting
the gift to the IRS. Also, the amount above $12,000 will be counted against a $1 million lifetime tax exclusion for
gifts. Each dollar of gift above $1 million reduces the amount that can be transferred tax-free in your estate.
The $12,000 figure is an exclusion from the gift tax reporting requirement. You may give $12,000 to each of your children,
their spouses, and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS.
In addition, if you're married, your spouse can duplicate these gifts. For example, a married couple with four children can
give away up to $96,000 in 2006 with no gift tax implications. In addition, the gifts will not count as taxable income to your
children (although the earnings on the gifts if they are invested will be taxed).
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Visit our offices:
17 Mifflin Ave. Suite 202
Havertown, PA 19083 |
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