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Planned Giving Estate Tax Law Changes A popular saying holds that there is nothing sure in life except death and taxes. Like most people, you probably have a very clear understanding of the effect of income taxes on your own and your family's life. You may even use the services of an income tax professional to try to minimize the effects of frequent changes in income tax legislation. Also like many people, you probably have a good idea how your death would impact your family, particularly financially. You have probably taken steps to try to minimize these negative effects also. But have you stopped here? Have you considered only how your death would immediately affect family members? How will your death affect your estate? Further, how does current estate tax law affect your estate? Finally, how will your estate affect your family members? Your estate has no existence until your death. It is a legal concept only - you can't see it, it has no physical form. You may also clearly understand that estate planning is valuable to reduce estate tax liability. But is this anything more to you than just a dry concept? Think of your estate having physical substance. Give it a form - perhaps a duplicate of yourself, that becomes active upon your death. By visualizing it as a tangible object, you can more easily consider how it will affect, or interact with, your family members. You have to pay income tax; your estate has to pay estate tax. This brings estate tax law into a bit clearer focus and provides it with a sense of immediacy. Now you begin to understand the enormous impact estate tax law makes in many peoples' lives. You may recognize how frequent changes in estate tax law can significantly affect your estate plans as well. By keeping abreast of the changing estate tax exemption amount and rate, you can minimize the amount your estate will have to pay the government in estate taxes. Under The Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax exemption will continue to increase, to $3.5 million in 2009, while the maximum estate tax rates will continue to decrease, to 45% in 2007. In 2010, the estate tax will be completely suspended. It will be reinstated in 2011, at 55%, barring additional future changes. You may find this legislation confusing and overwhelming. With all these changes, how can you create a sound estate plan? Your best approach may be to simply reduce the size of your estate. There are many ways to decrease the size of your taxable estate. The annual gift tax exclusion allows you to give up to $11,000 per person, each year, to anyone you choose. There are no limits on the amount you can give to any charitable organization you choose either during your lifetime or through a bequest at death. You can gift real property to a charitable organization or your choice, retaining a life estate for yourself and/or other family members. Any of these alternatives reduce the size of your estate, eliminating or reducing your potential estate tax liability. Income-generating gifting vehicles are particularly attractive if your assets produce little or no income, because they can significantly improve your cash flow. Charitable gift annuities provide you and your spouse with a lifetime income as well as reducing your estate. There are charitable remainder trusts (CRTs), which pay you and, if you choose, your spouse a steady income for the rest of your life and or a specified term. Transferring assets to a CRT permanently removes them from your estate, In addition, highly appreciated assets placed in a CRT are, when sold, exempt from capital gains taxes. You can name Minnewaska Home Development Foundation beneficiary of the trust. These vehicles offer income and tax benefits as well as provide you with great personal satisfaction, knowing you are making a significant charitable gift. Regardless of changes in estate tax law, you have various means available to protect your estate from taxes. Please contact our organization if you have questions on reducing the size of your estate or planned giving in general.
Minnewaska Lutheran Home
The information provides is not intended as legal, tax, or investment advice. Please consult
an attorney, tax or financial planning professional for questions specific to your financial
situation. |
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