Many people may believe that they do not have to be worried about federal estate tax if they do not make a large amount of money, but if you have a substantial amount of life insurance, own a home or have a good retirement account or plan, there are some things you need to think about and consider when it comes to estate tax. If you have questions or concerns about how estate tax may affect you and your family, you should talk to a estate planning lawyer at the Higgins Firm. We will help you to determine the best plan for you and answer any concerns you may have.
So, you may be asking what exactly is included in estate tax? Federal estate tax includes assets such as proceeds from any life insurance you may have, any house or property you own including vacation and rental properties. It also includes retirement plan accounts, vehicles, furniture, any valuable collectibles you may have and any other property and items you own. Finally, if you have shares in a family business or corporation those are also included.
If you are single, any life insurance coverage you may have is subject to federal estate tax. If you are married, it is not that big of an issue because the life insurance benefits would go to the surviving spouse tax free because of a marital deduction. However, this only applies if your spouse is a citizen of the United States.
It is important to know that the value of life insurance that you have “incidents of ownership” over will be included in estate tax when you pass away. Incidents of ownership include changing beneficiaries,canceling a policy, or borrowing from a policy. If you have these incidents of ownership it does not matter who you named as the beneficiary. If you have a life insurance policy for yourself and you name a family member has your beneficiary, when you pass away the death benefits will be included in the estate tax even if the money never goes through your estate.
You have an option if you want to avoid estate tax on your life insurance. You can have an irrevocable trust set up but if you use a trust, you will not be able to change the beneficiary once the policy is in the trust. If you do not have life insurance or assets to think about due to the federal exemption, you may also need to think about death taxes in the state where you live. Finally, you will also have to deal with estate taxes if you name a guardian to take care of your young children or if you inherit money from a relative or friend that has passed away.
Estate planning and tax can be confusing and complicated because there are many things to consider that you may not be aware of even if you do not make large amounts of money. If you have questions about estate tax or want to start estate planning, it is a good idea to consult an estate planning attorney with the Higgins Firm. We have the experience and knowledgeable to go over all the options with you and let you know about any tax issues you may need to be concerned about. We care about our clients and will help you determine the best estate plan for your family so that they will be protected in the future.
Please contact us today online or by calling 800.705.2121 to discuss your legal options and any questions you may have.