When people are planning for their future, they are likely to consider their estate. To protect your assets, it’s best to work with an experienced estate planning lawyer. These attorneys can help you learn more about the estate tax, which deducts taxes from the assets in your estate before assets are distributed to your beneficiaries. For example, if you plan to pass on the title to your property, you will need to be concerned with the payment of legacy tax.
You may wonder, “What is the difference between inheritance tax and estate tax?” One difference is that inheritance tax is paid at the state level and paid by those who inherit assets. An estate tax is paid on the assets in the estate on both state and federal levels. The distribution of assets will be carried out according to the terms of inheritance.
Some people may wonder, “Can you inherit property before death?” You may be interested to know that property can legally be transferred before death. When this occurs, the title can be transferred immediately. This practice can occur as a part of your estate strategy and may sometimes be suggested by your attorney.
Most people assume they will never have any bankruptcy issues but in the United States more than 60% of bankruptcy filings are caused by medical bills. You may not expect to ever need bankruptcy mediation but in February 2014, there were about 3,400 bankruptcy filings a day. Many people assume they will not have to deal with civil rights violations or will take part in class actions lawsuits but one in three African Americans reports being discriminated against over the past 12 months. While people do not think they will face these problems, many worry that they are subject to the federal estate tax law.
Federal Estate Tax Law and You.
- Your estate is probably not subject to the estate tax. Unless you are one of the 0.2 percent, your estate will not be impacted by the estate tax. Nearly 99.8 percent of estates are exempt. This tax, often mislabeled the “death tax” is only for the ultra rich. If you are the administrator of an estate, bear fiduciary responsibility for another or are worried about your own, this tax probably does not apply to you.
- Even if your estate is subject to federal estate tax law, it will not be taxed at full value. Of the estates that are subject to the estate tax, most pay a fraction of what the estate is worth because the exemption for the tax is so high. The 2015 level was $5.43 million. Estates are taxed on any amount over that so a $6 million estate would pay taxes on $570,000 of the estate.
- Many estates can take advantage of loopholes. Large, wealthy estates have expensive lawyers and accountants who can take advantage of loopholes in the system to avoid any tax liability. They are able to pass hundreds of millions of dollars around and not pay any taxes in it.
- Very few small businesses and farms fall under the purview of the federal estate tax law. In 2013, 20 businesses nationwide were subject to the estate tax. Any small businesses or farms are also offered the chance to pay the tax back over decades so they can meet their obligations without it impacting their business.
- Despite the small number of people impacted, the estate tax is an important generator if revenue for the government. The government will collect about $246 billion between 2016 and 2025 from the estate tax. It was created in 1916 to tax certain assets that faced no other taxes. This covers the budgets for the Centers for Disease Control and Prevention, the Food and Drug Administration and the Environmental Protection Agency. All three budgets combine to be less than $246 billion.
Any concerns you have about your estate or that of a loved one should be discussed with lawyers experienced at dealing with federal estate tax law. The odds are in your favor that you will not be forced to pay a “death tax.”
