President Obamas Proposed Income Tax Changes For 2011

RSS Author RSS     Views:N/A
Bookmark and Share          Republish
The marital deduction is an important estate planning tool. It provides that any assets passing to a surviving spouse pass tax free at the time the first spouse dies (assuming the surviving spouse is a U.S. citizen). However, the marital deduction ends after the first death. Unless the surviving spouse remarries, the real impact of the federal estate tax is felt at the sec¬ond death. In fact, the bill may even be higher if the estate continues to grow.

Earlier this year, one of the mega-bills incorporated a long-sought provision that codified an economic substance doctrine by making it a part of the Internal Revenue Code. It remains to be seen how that codification will impact popular estate planning techniques, as the Service has yet to publish any guidance on how to comply with the new law. However, there is pending legislation in both Houses that would sound a death knell for all sophisticated wealth transfers vehicles involving discounts on liquid assets that pass to family members. If you consider gifting an ownership interest in a family partnership, the time act is now before discounts are taken away forever. If done by a good attorney in respectable lawyer offices, these transfers are still likely to achieve the intended estate planning results, even under a higher level of government scrutiny.

Cost-basis becomes complicated when an appreciated asset is passed on to someone else, either through an outright gift or through an estate. If an asset is passed on before the giver's death, then the recipient assumes the same cost-basis as the giver. If the asset is passed on after the giver's death, the recipient's cost-basis is the market value on the date used to calculate tax on the estate. This 'stepped-up' cost-basis can save tens of thousands of dollars in capital gains tax.

Americans are becoming a more technology-dependent society, opting to carry out most social and financial interactions online rather than in person. As online-based transactions move to the forefront, many consumers are choosing the do-it-yourself option to invest their money, conduct their own banking and draft up important documents, rather than relying on a professional. The latest independent move Americans are making is drafting their own wills.

When you pay monthly mortgage payment to a bank or financial institution holding your mortgage then the amount generally includes the real estate taxes that have to be paid on your property. The bank or mortgage holder pays these real estate taxes to the proper taxing county authority on their due dates. When your real estate taxes are included in your mortgage payments then you may claim an IRS deduction only in the tax year you actually pay your real estate taxes. You will find the real estate taxes paid for the year on the statement than the bank or mortgage lender gives you on the end of the year mortgage statements.

If you're writing a will, you can ask an estate tax lawyer for help as well. You can make the grieving period much easier for your loved ones if you take care of any possible tax on your estate by setting aside an account to pay off that tax, which an estate tax lawyer can estimate for you.

I respect Ted Kennedy and feel bad about bringing this up. However, this is the way government celebrates a person's life, take half their wealth upon their death. There have to be other, more compassionate ways to soak the rich. Can you imagine being the IRS guy that has to knock on the family's door to collect this one?

The reality is that under current tax laws, the federal estate tax is replaced in 2010 by a capital gains tax to be paid by heirs. The heirs will inherit property with a carryover tax basis, instead of with a stepped-up basis. The heirs will be responsible for paying capital gains taxes when they sell the property. Under the capital gains regime, there will be a premium on record keeping, because if a taxpayer cannot prove the tax basis, then the IRS presumes that the basis is zero resulting in the entire sales amount subjected to capital gains taxes.

When planning an estate plan you must use a professional such as an attorney who specializes in estate taxes. The rules and regulations of the estate planning system allow for many exemptions that can minimize or eliminate estate taxes completely.

Report this article
The Unseen Battle Over Estate Taxes. Visit IRS Tax Attorney. Worried About Estate Taxes. Visit Tax Lawyer.

Bookmark and Share

Ask a Question about this Article