Consider Estate Planning With Tax Consequences

Imagine what would happen if you would die suddenly and still relatively young, while leaving your family behind. Perhaps you have never discussed this kind of situation with your partner or you have never really thought about a funeral plan. If this is the case,  it would create a very difficult situation for your family as they would be forced to make all decisions on their own while dealing with huge stress and emotional pain.

Another important problem for your family to solve would be finding out on how to cover the cost of the service if you never pre-paid for it. Do not forget that your assets will not be accessible immediately.  There is usually a certain amount of time before their release is admitted by a probate court and that means even more problems for your family as they would need to figure out how to pay for the relevant service afterwards. However, you could avoid this situation by preparing a plan that would ensure availability of the funds that would be necesssary for the service.

Planning in advance, as well as making sure that your family will have sufficient financial help, will help you to prevent many difficulties that your family would be forced to face- like leaving them without any support or even  creating many unnecessary expenses for them. If you keep in mind that majority of your assets will be untouchable at first, you realize that your family could get into big financial trouble. However, the good news is that you can avoid all of this by planning and acting ahead, like right now. That would save a lot of money and time rather than do it later in a hurry or too late.

Some of the actions that you could take today are setting up a life insurance or a trust or even changing accounts to joint accounts. Another important thing to consider is creating an estate plan.  There is a possibility that some of your assets would be conditioned to the high rate of estate taxes and planning in advance would help you to prevent the situation in which those assets would be bound to avoidable tax liabilities.

Another matter you need to be  concerned with is tax. It is extremely important to know how to avoid or at least reduce tax expenses that would be a  result of transferring your finances or assets after your death. Other thing you have to think about is determining who exactly will be  the recipient of your assets.

You can consult your worries and your financial situation with an expert. Estate planning attorney would definitely be able to help you with creating a perfect estate plan that would consider all unnecessary tax liabilities and would find the way to avoid them. You certainly want to prevent the situation in which half of your estate would be subject to gift or estate taxes, leaving your family without weallth which technically belongs to them.

Estate Taxes Consideration

All your estate assets are  enumerated and valued upon your death and depending on their financial worth, relevant estate taxes have to be paid. However, you could make use of tax exemption which will reduce or even completely eliminate the obligation to pay tax. It fluctuates each year in the same manner as the tax rate does.

For example, in 2012 was tax exemption $5.12 million, altough it is believed to become only $1 million in 2013. Similarly, the tax rate was 35 percent in 2012, but it will raise and in 2013 it will be 55 percent. That means that the assets of a person dying in 2013  that would have value of $4 million dollars (assuming that this person failed to create an estate plan), would be reduced by astonishing $1.65 million due to the estate tax.

How About Gift Taxes

It is important to know that even a gift that you decide to give to someone could be subject to so-called gift taxes. No matter who you are, how wealthy you are, doesn’t matter. It also won‘t matter whether you are giving money or anotther kind of asset and you as a taxpayer are allowed to make so many yearly contributions as you want to, assuming that the final amount will not exceed annual exclusion amount of the gift tax.

This amount was $13,000 per recipient in 2012. Apart of that, you also have a lifetime exemption which was  $5.12 million in 2012, however, it will be reduced to only $1 million in 2013. If, however, the final amount exceeds either annual exclusion or lifetime exemption, your gifts would be subject to the gift tax, which rate was 35 percent in 2012, however, it will become 55 percent in 2013.