When you are planning your estate, you should be aware of the potential for asset erosion, and the biggest potential culprit is the federal estate tax. As of this writing the maximum rate of the federal estate tax is set to go to 55% next year, and the exclusion amount is $5.12 million. This means that the portion of your estate that exceeds $5,120,000 would be subject to a 55% federal levy.
A lot of people shake their heads with dismay when they consider the federal estate tax. They feel as though it is inherently unfair and often raise the following reasons:
For one thing, they say that the estate tax is an instance of double taxation. To provide a very simple example, let’s say that you save a certain percentage of every paycheck that you earned for 50 years. When you get your check it may represent $.70 of every dollar that you earned with the rest of it going to income and payroll taxes.
So this money that you are saving is coming out of the remainder that you have left over after paying taxes. Why should it be taxed at a high rate yet again after you pass away?
Another problem that many people have with the estate tax is that it is selectively imposed based on the ever-changing amount of the estate tax exclusion.
Regardless of how you feel about the fairness of the estate tax, it is a fact of life. The good news is that there are steps that you can take to reduce and sometimes even eliminate your estate tax exposure. If you would like to discuss the matter, simply take a moment to arrange for a consultation with a Northern Kentucky estate planning lawyer.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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