Archive for the ‘Personal Finance’ Category
April 9th, 2009 | 
Author: 
Julia asked:
My grandpa is a miser, and he has about three or four million saved up. My dad keeps saying that Obama’s estate tax will take away my inheritance when he passes away. The house my family lives in is also owned by him. Is what my dad said true? Please explain… Thanks.
Gabriella Forsythe
My grandpa is a miser, and he has about three or four million saved up. My dad keeps saying that Obama’s estate tax will take away my inheritance when he passes away. The house my family lives in is also owned by him. Is what my dad said true? Please explain… Thanks.
Gabriella Forsythe
Dollars and Sense
As published in the Naperville Sun August 17, 2008
By Denice Gierach
Back in 2001, Congress changed the law on estate taxes, creating estate tax exemptions that changed over the years. For instance, in 2008, the exemption from federal estate tax is set at $2 million. If you have one dollar more than that number, your excess will be taxed at 45 percent plus, depending on the amount of the excess.
According to this legislation, the federal estate tax exemption amount was to increase in 2009 to $3.5 million and in 2010, the federal estate tax was abolished for a year. Even though your estate may not be subject to federal estate tax if you were to pass in 2010, your estate will not receive a “stepped up” basis in that year. In other words, your estate is “trading” the federal estate tax for the capital gains tax in that one year.
As this law now exists, in 2011, the federal estate tax exemption is scheduled to come back at the $1 million amount, with the highest tax rate at 55 percent. This means that many estate plans (wills and trusts) would need to be reviewed to determine how the law would apply and how much tax your estate would be subject to. Obviously, it also would mean that many more estates would be subject to federal estate taxes if this were to happen.
Despite that there is only one year left before the federal estate tax is repealed and then springs back with a $1 million exemption and a higher top tax rate, Congress has failed to act. Some years ago, there was a movement to abolish the federal estate tax altogether, as the thought was that a person paid taxes of many varieties all their lives and should be allowed to transfer the balance of their assets tax free to their children. Despite this fact, Congress instead entered into this compromise and has failed to place estate tax reform on the front burner.
This lack of action by Congress has caused people to be on a roller coaster, having to monitor their account fluctuations on an annual basis to determine how the law in that year will apply to them. The conventional wisdom was that Congress would act sometime before the 2010 reset of the exemption to make a more permanent reform. In March, some members of the Senate Finance Committee set forth a budget resolution that included a nonbinding amendment that would freeze the estate tax at 2009 levels, meaning that $3.5 million worth of an estate would be exempt (or $7 million for a couple, if properly structured). The rest of the estate above the exemption would then be taxed at 45 percent. There have been a number of other proposals put forward, some of which are more generous federal estate tax exemptions.
Until Congress acts, be prepared to ride the roller coaster!
By: Denice Gierach
About the Author:
As published in the Naperville Sun August 17, 2008
By Denice Gierach
Back in 2001, Congress changed the law on estate taxes, creating estate tax exemptions that changed over the years. For instance, in 2008, the exemption from federal estate tax is set at $2 million. If you have one dollar more than that number, your excess will be taxed at 45 percent plus, depending on the amount of the excess.
According to this legislation, the federal estate tax exemption amount was to increase in 2009 to $3.5 million and in 2010, the federal estate tax was abolished for a year. Even though your estate may not be subject to federal estate tax if you were to pass in 2010, your estate will not receive a “stepped up” basis in that year. In other words, your estate is “trading” the federal estate tax for the capital gains tax in that one year.
As this law now exists, in 2011, the federal estate tax exemption is scheduled to come back at the $1 million amount, with the highest tax rate at 55 percent. This means that many estate plans (wills and trusts) would need to be reviewed to determine how the law would apply and how much tax your estate would be subject to. Obviously, it also would mean that many more estates would be subject to federal estate taxes if this were to happen.
Despite that there is only one year left before the federal estate tax is repealed and then springs back with a $1 million exemption and a higher top tax rate, Congress has failed to act. Some years ago, there was a movement to abolish the federal estate tax altogether, as the thought was that a person paid taxes of many varieties all their lives and should be allowed to transfer the balance of their assets tax free to their children. Despite this fact, Congress instead entered into this compromise and has failed to place estate tax reform on the front burner.
This lack of action by Congress has caused people to be on a roller coaster, having to monitor their account fluctuations on an annual basis to determine how the law in that year will apply to them. The conventional wisdom was that Congress would act sometime before the 2010 reset of the exemption to make a more permanent reform. In March, some members of the Senate Finance Committee set forth a budget resolution that included a nonbinding amendment that would freeze the estate tax at 2009 levels, meaning that $3.5 million worth of an estate would be exempt (or $7 million for a couple, if properly structured). The rest of the estate above the exemption would then be taxed at 45 percent. There have been a number of other proposals put forward, some of which are more generous federal estate tax exemptions.
Until Congress acts, be prepared to ride the roller coaster!
By: Denice Gierach
About the Author:
Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com. For more information on Denice and The Gierach Law Firm visit Gierach Law Firm
Dennis Smeltzer
Posted in Personal Finance | 
Tags: 1 Million, 5 Million, Assets, Capital Gains Tax, Compromise, Congress, Dollars And Sense, Estate Tax Exemption, Estate Tax Exemptions, Federal Estate Tax, Federal Estate Tax Exemption, Federal Estate Taxes, Limbo, Naperville Sun, Roller Coaster, Stepped Up Basis, Tax Dollars, Tax Rate, Tax Reform, Wills And Trusts | 
No Comments »
Geirach
As published in The Naperville Sun – November 16, 2008
The economy is in a temporary mess with home prices diminishing and the stock and bond market falling. Yet, for anyone with a federal estate tax issue potentially at his or her death, this is a good time to give as many assets as one can. This is one of the best opportunities to transfer wealth to younger generations, without incurring the federal estate tax in the process.
The federal system for estates and gifts is a combined system. A person is able to give an annual gift of $12,000 per donee (or $24,000 if that person’s spouse shares the gift). If the value of the gift exceeds the $12,000 amount, the portion above that amount uses up part of the lifetime exemption amount.
In 2001, Congress had changed the law in this area, which increased the amount that an individual could leave to someone other than their spouse without incurring the federal estate taxes. This amount is $2 million today, which is scheduled to increase to $3.5 million in 2009.
The federal estate tax, according to the 2001 law, is scheduled to disappear in 2010 (estates will not receive the stepped-up basis of fair market value as of date of death, and thus pay capital gains taxes instead), and will reappear in 2011 with a $1 million amount. There is also one additional rule in which you cannot give more than $1 million during your lifetime without incurring a tax on the gift.
This is the current state of the law, which will be changed by the new Congress when they are sworn in next year. During the political campaign, both candidates stated they wished to leave this lifetime exemption at a higher amount than $1 million. President-elect Barack Obama said he wished to make the lifetime exemption at $3.5 million and leave the tax rate at the current rate of 45 percent.
As no tax professionals believe the federal estate tax system will be abolished anytime soon, most planning involves the transfer or gift of property from one generation to the next with the least tax cost. Because of the temporary diminished prices on stocks, bonds and real estate, this is a great time to consider making gifts of those assets, which will allow the recipient of the gift to enjoy the rebound in price when it occurs.
Another thing you can do is to pay the tuition and medical bills for your children or grandchildren with no tax consequences to federal gift or estate taxes.
In addition, as the interest rates are down now, this makes many other techniques in giving more to your heirs much more attractive. It is more appealing now to use family loans, grantor retained annuity trusts, an intentionally defective grantor trust or a charitable lead trust, which will allow you to give more to your heirs than you would have been able to when rates were higher. These tax techniques rely on an interest rate that the government sets monthly, called the applicable federal rate, which is set lower than the rates that you might see for a 30-year mortgage.
Because of the above, there are great opportunities to transfer your wealth to the next generation. If you are one of the people who may otherwise have to pay federal estate taxes at your death, consider contacting your estate planning attorney to determine your best course of action to limit your exposure to this tax.
Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com or 630-756-1160.
By: Denice Gierach
About the Author:
As published in The Naperville Sun – November 16, 2008
The economy is in a temporary mess with home prices diminishing and the stock and bond market falling. Yet, for anyone with a federal estate tax issue potentially at his or her death, this is a good time to give as many assets as one can. This is one of the best opportunities to transfer wealth to younger generations, without incurring the federal estate tax in the process.
The federal system for estates and gifts is a combined system. A person is able to give an annual gift of $12,000 per donee (or $24,000 if that person’s spouse shares the gift). If the value of the gift exceeds the $12,000 amount, the portion above that amount uses up part of the lifetime exemption amount.
In 2001, Congress had changed the law in this area, which increased the amount that an individual could leave to someone other than their spouse without incurring the federal estate taxes. This amount is $2 million today, which is scheduled to increase to $3.5 million in 2009.
The federal estate tax, according to the 2001 law, is scheduled to disappear in 2010 (estates will not receive the stepped-up basis of fair market value as of date of death, and thus pay capital gains taxes instead), and will reappear in 2011 with a $1 million amount. There is also one additional rule in which you cannot give more than $1 million during your lifetime without incurring a tax on the gift.
This is the current state of the law, which will be changed by the new Congress when they are sworn in next year. During the political campaign, both candidates stated they wished to leave this lifetime exemption at a higher amount than $1 million. President-elect Barack Obama said he wished to make the lifetime exemption at $3.5 million and leave the tax rate at the current rate of 45 percent.
As no tax professionals believe the federal estate tax system will be abolished anytime soon, most planning involves the transfer or gift of property from one generation to the next with the least tax cost. Because of the temporary diminished prices on stocks, bonds and real estate, this is a great time to consider making gifts of those assets, which will allow the recipient of the gift to enjoy the rebound in price when it occurs.
Another thing you can do is to pay the tuition and medical bills for your children or grandchildren with no tax consequences to federal gift or estate taxes.
In addition, as the interest rates are down now, this makes many other techniques in giving more to your heirs much more attractive. It is more appealing now to use family loans, grantor retained annuity trusts, an intentionally defective grantor trust or a charitable lead trust, which will allow you to give more to your heirs than you would have been able to when rates were higher. These tax techniques rely on an interest rate that the government sets monthly, called the applicable federal rate, which is set lower than the rates that you might see for a 30-year mortgage.
Because of the above, there are great opportunities to transfer your wealth to the next generation. If you are one of the people who may otherwise have to pay federal estate taxes at your death, consider contacting your estate planning attorney to determine your best course of action to limit your exposure to this tax.
Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com or 630-756-1160.
By: Denice Gierach
About the Author:
Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com or 630-756-1160.
Stacee Thoms
Posted in Personal Finance |
Tags: 1 Million, 5 Million, Barack Obama, Bond Market, Capital Gains Taxes, Current Rate, Current State, Dodge, Donee, Federal Estate Tax, Federal Estate Taxes, Generations, Good Time, Lifetime, Naperville Sun, Political Campaign, President Elect, Stepped Up Basis, Tax Professionals, Tax Rate |
No Comments »
tcoupes@verizon.net asked:
In Texas parents died in 2005. Sibling and I equally to share in real estate previously held by parents. Neither wanted so property was sold. At sale proceeds distributed by title company, half to each of us. What is my federal tax liablity? Entire estate was well below Federal Estate Tax limit.
Bart
In Texas parents died in 2005. Sibling and I equally to share in real estate previously held by parents. Neither wanted so property was sold. At sale proceeds distributed by title company, half to each of us. What is my federal tax liablity? Entire estate was well below Federal Estate Tax limit.
Bart