Death And Taxes

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As Benjamin Franklin once said nothing can be said to be certain, except death and taxes. And he wasnt kidding When you pass away, your estate can incur up to five different kinds of taxes.

Gift taxes

If you have a sizeable estate and wish to avoid hefty estate taxes, gifting items to your loved ones before your death may help but be aware, gifts over a certain amount may incur gift taxes that you - the giver - will have to pay.

In your lifetime, you have a one million dollar gift tax exemption. Besides this lifetime exemption there is also a yearly exclusion. You may gift up to $13,000 per year, per person. Once you go over $13,000 for any family member in a year, you will cut into your lifetime exemption amount. Gift taxes will be due after you have exhausted your million dollar exemption and/or have exceeded your yearly allotment. Whether you think a gift will be exempt or not, it is important to note all gifts on your yearly tax return.

Estate Taxes

Estate taxes may be due to the federal or state government based upon the net worth of your estate at the time of your death. As of January 2010, there is no federal estate tax, since Congress did not renew the 2009 tax exempt level of 3.5 million, but this reprieve wont last. Unless Congress decides otherwise, in 2011 the federal estate tax exemption will be one million, which is the amount from ten years ago.

State Taxes

Washington doesnt have an inheritance tax but it does have an estate tax with a $2 million exemption. There was talk of raising the rates from 10 to 19% to 20 to 28% back in March so depending upon the value of your estate and how the federal and state governments act in the future, you could conceivably pay more in state taxes than to Uncle Sam.

Generation Skipping Tax

The generation skipping tax refers to the transfer of money or property to someone more than a generation younger than the deceased. This usually means grandchildren, but it can also mean someone who is not a family member and is over 37 years younger than the giver. In 2009 the generation skipping taxable amount was 3.5 million per inheritor. In 2010, there is no limit due to the repeal of the generation skipping tax and estate tax laws.

Income Taxes

All estates are susceptible to income taxes even if they are not taxed in any other way. Income taxes are due on income an estate receives after the death of the estate owner. During the estate settlement process, funds and accounts may be put on hold while they continue to accumulate interest. The executor of the estate is responsible for paying taxes on any income the estate has earned.

About the Author:
Rial Moulton and Moulton Law Offices is a leading provider of expert estate and financial planning in Spokane, WA. For more information on estate taxes, visit our website.



Article Originally Published On: http://www.articlesnatch.com


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