The
use, conservation, and transfer of one's wealth should always
include a well-thought-out estate plan that takes into consideration:
(1) The increase in value of an existing estate so that the
needs of the family are met; (2) The preservation and protection
of the estate from unnecessary taxes and costs; and (3) The
orderly administration and disposition of assets upon the
death of the owner.
Estate
Tax Structure—
Estate tax, the tax on a person's wealth, is more broad than
tax on a person's income.
A
person's wealth includes:
- Any
property or interest thereof owned by the person whether
real, personal, or intangible, jointly or individually held,
- Any property where the person at time of death held a
general power of appointment, a power to revoke, or retained
a life estate, and
- Certain taxable gifts made within three years of the date
a person passes away.
Income
tax rates range from 10% to 38.6% with a maximum capital gains
tax of 15%. Estate tax rates range from 18% to 46%.
Each decedent is entitled to a Unified Tax Credit of $345,800,
which currently exempts the equivalent of $1,000,000 worth
of assets in the estate. It is scheduled to increase as follows:
|
Amount
Exempted
|
Year |
Tax
Credit |
$
1,000,000 |
2002,
2003 |
$
345,800 |
$
1,500,000 |
2004,
2005 |
$
555,800 |
$
2,000,000 |
2006
- 2008 |
$
780,800 |
$
3,500,000 |
2009 |
$
1,230,800 |
entire
estate |
2010 |
none |
$
1,000,000 |
2011 |
$
345,800 |
Gift
Tax Structure—
During
a donor's lifetime, gifts with a present interest of up to
$12,000 per year to each donee may be made without any gift
tax consequence. An election is available where the donor
and his spouse may combine their annual exclusions to $24,000.
Gifts
of a future interest (i.e., made to a trust for the benefit
of a donee) will not qualify for this exclusion unless the
donee:
- Receives notice of the existence of the power to withdraw
the gift from the trust that was contributed by the donor
and
- Has
a reasonable time thereafter within which the donee can
exercise this power.
- This
right is commonly referred as a "Crummey Right
of Withdrawal".
To
the extent that a gift does not qualify for this annual exclusion,
it is deemed to be a taxable gift. Any taxable gift will first
be applied against the donor's available Unified Credit. Once
this credit is exhausted, gift tax would be due on the transfer.
The gift tax rates are the same as the estate tax rates.
Documents—
Last
Will & Testament—
Declaration stating the disposition of your property to
be performed after your death and nominating the person
to act as the personal representative.
Living Will—
Governs the withholding or withdrawal of life-sustaining
treatment from an individual in the event of an incurable
or irreversible condition that will cause death within a
relatively short time.
Durable
Power of Attorney—
Appoints another person as an agent and confers authority
on that person to perform certain acts or kinds of acts
on your behalf.
Trust—
Declaration created by a grantor for the benefit of designated
beneficiaries which appoints a trustee to manage the trust
assets and income for the economic benefit of all the beneficiaries.
Such a trust may be revocable or irrevocable. Sometimes
a revocable trust is called a "Living Trust".
For
a prompt evaluation of your situation, we encourage you to
complete our Estate
Planning Questionnaire or
call us toll-free at 1.888.FL.TRUST.
