The objective of this discussion is to review some of the myths and realities of estate planning. A number of articles have been written on the subject but let’s see if we can’t put a different spin on it by keeping it simple. By dispelling some of the common misconceptions, we will have a better understanding of how important it is to take positive action to keep our estate plans in order.
The Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA) threw many individuals for a loop when it came to estate plannings. Tax laws are never simple but EGTRRA added a level of confusion rarely seen in advanced planning. For instance, between now and 2011 the federal estate tax is scheduled to decrease, disappear and then spring back to life. According to a Wall Street Journal article dated May 11, 2005, the “…current estate tax law puts estate-tax planners in an impossible situation…”. With such uncertainty, some potentially damaging estate planning myths have surfaced. These financial “urban legends” stand in the way of prudent estate planning. We will address some of the most prevalent and most common estate planning myths so we can be better informed. Myth. The Federal Estate Tax was repealed.
If you find that they are, it will be worth your while to discuss with an expert the estate planning tax strategies which will let you preserve as much of your assets as possible for your heirs. These strategies can include things placing your assets into a living so that you can control them during your lifetime, and prevent them from being included in your taxable estate when you die. Having a living trust will also benefit your heirs, because it will exempt you assets from being tied up in the expensive and lengthy probate process.
Permanent repeal of the federal estate tax requires an affirmative vote of 60 Senators. This is not an easy task. After all, repealing the federal estate would eliminate a significant source of federal revenue. Just how much revenue would the repeal of the federal estate tax eliminate? The cost of repeal through 2015 (including the current rates and exemption amounts) is estimated at $290 billion (according to the Joint Tax Committee, a bipartisan group). Other sources have estimated that the cost would be even higher. In addition to the cost of repeal, the federal government has been hit with several large budget items including Hurricane Katrina, the Iraq war and a growing deficit. Additionally, the election cycle always plays a role. Faced with these significant budgetary items, repeal of the estate tax appears to be less likely.
A significant portion of your assets might be vulnerable to estate taxes after you die. However, there are ways to leave behind an estate without losing most of it to taxes. It is important that you consult with a qualified attorney to discuss the most strategic methods for establishing your unique plan. A well-crafted plan will ensure that your beneficiaries get the most benefit from your years of hard work.
While such a scenario may be rare, estate planning tax advice is not under the oversight of any specific government authority. So the quality of advice you get will depend to a great degree on the experience of you advisor, be it an attorney, accountant, banker, or financial planner. By using an estate planning guide to familiarize yourself with your options so that you know what questions to ask, you will have a much better chance of finding a trustworthy professional to provide your estate planning tax advice.
Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: Getting Home Loans With A Low Interest Rate You have full permission to reprint this article provided this box is kept unchanged.
