Estate Planning is a boring topic. However, there are few issues more misunderstood that have such tremendous impact on families and the legacy they leave behind. Many people don™t realize that when adding a home to their assets, being a œpaper millionaire isn™t as farfetched as it seems when living paycheck-to-paycheck.The federal estate tax exemption has been extended for two years (2011 & 2012). The extension also increased the amount to $5 million ($10 million for couples) and the tax rate has been lowered to 35%. This means that you can leave $5 million to your heirs free of federal estate tax and that most married couples can leave up to $10 million free of federal estate tax.For gift tax, the new law changed from the $1 million Lifetime Gift Tax Exclusion in 2010 to a $5 million Unified Gift Tax Credit. The new law creates an important planning opportunity. This means, as of 2011, individuals will be able to make gifts of $5 million ($10 million for a married couple).The value of your estate includes all of your assets (ex: cash, investments, your personal residence, other real estate, etc.) generally determined at the fair market value on the date of death. Since the law may revert back to $1 million, serious tax planning is necessary if your assets exceed the $1 million.As stated earlier, the provisions are temporary. They are assured for this year and next. If the law is not extended or amended, it will sunset and the Federal estate tax exemption will revert back to $1 million with a maximum tax rate of 55%!It is important that you consult an accountant and/or a financial planner to make sure you are minimizing Uncle Sam™s bite from your estate, so that you leave the maximum number of dollars to your loved ones. If you need a referral to a solid advisor, reach out to your loan officer¦they should have one on their team.
