During the last few years, the majority of Oklahoma citizens have not needed to worry about estate tax. If you passed away in 2011 or 2012 you are eligible for a $5 million estate tax exemption. Even though the size of your estate includes life insurance proceeds paid to your beneficiaries upon your death, a fact most people do not understand, most estates are less that $5 million.
Unfortunately, the estate tax exemption amount is going to change January 1, 2013. The exemption amount will only be $1 million starting the coming year. This will cause a lot more Oklahoma households to get slammed with this tax. Even worse, all of your assets over $1 million will be taxed at 55%. That means if your house, cars, brokerage accounts, bank accounts and other property are worth $500,000, and you have a $1 million life insurance benefit, your family will be paying the IRS $275,000. Hopefully, Congress and the elected President will work together to change this.
Below are a few tips regarding the estate tax that you ought to remember:
- Unless you have engaged in advanced estate planning, everything counts. Your personal property counts. This consists of your: IRAs, insurance, annuities, autos, collectibles, 401(k)s, checking accounts, business interests, and so forth. All of you real property counts, like your house.
- With good planning, you can avoid taxation when the first spouse passes away.
- You can give away some property to lower your estate tax burden. You may give around $13,000 without tax implications each year. A number of families practice this gift planning. If you can afford to give funds away, then they won’t be in your estate when you pass, and they won’t get taxed. Other families – as an alternative for giving assets to young family members – will gift into trusts to help secure the gifted assets.
- You can give to charity. Anything you give to charity, either during your life or after your death, will not be taxed.
Estate tax planning is important, but it is also complex. This post is a general overview of the subject. If you are worried that the IRS will serve your family a large estate tax bill upon your death, I urge you to seek the advice of an attorney who focuses on Estate Planning.