While your estate is exempt from estate taxes if it is worth less than $5.12 million this year, change is not far off. Come 2013, if Congress doesn’t make additional changes, this amount drops to $1 million. That means, for every dollar you own above the $1 million exemption, it will be subject to federal estate taxes upon your death.
Here are some other major federal tax laws affecting estate planning in 2012:
• The top federal estate tax rate is 35 percent.
• The exemption level for generation-skipping transfer taxes is $5.12 million. The federal generation-skipping transfer tax rate is 35 percent. This means that if you leave more than $5.12 million in property to a grandchild or anyone two or more generations younger than you, your gift will incur a 35 percent tax.
• The top gift tax rate is 35 percent. The annual gift tax exclusion—the amount you can give to anyone gift tax–free each year—remains at $13,000 this year ($26,000 for married couples). So if you plan to give above the exclusion threshold, it will be subject to gift tax if your $5.12 million lifetime exemption has already been used.
Estate Planning: There’s No Better Time Than Now
Most of us know that we need an estate plan to determine who gets what from our assets when we are gone. Plus, we know that without a valid will, we are leaving it up to the state to determine who gets the majority of our assets and belongings after we die. But did you know that with proper planning you may be able to eliminate estate taxes? This will be especially important in 2013, when the estate tax threshold drops to $1 million, unless Congress makes additional changes.
An Opportunity for Helping Others
Never become so engrossed in legal and tax complexities that you lose sight of the people and charitable organizations you want to help. If you believe in what we do and you’d like to save on future federal estate taxes by leaving a gift to Gonzaga University in your estate plans, you can leave a lasting legacy in the most flexible way possible. Consider revocable options such as including us in your will or designating us as the beneficiary of a percentage of your retirement plan assets.
Your Next Steps
If you have questions about tax laws, please contact your estate planning attorney. You can contact us at 800-388-0881 or plannedgiving@gonzaga.edu to learn about ways to leave a legacy while saving estate taxes at the same time.