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For the More Affluent Home Seller

Estate Planning is a boring topic. However, there are few issues more misunderstood that have such tremendous impact on families and the legacy they leave behind. Many people don’t realize that when adding a home to their assets, being a “paper” millionaire isn’t as farfetched as it seems when living paycheck-to-paycheck.

The federal estate tax exemption has been extended for two years (2011 & 2012). The extension also increased the amount to $5 million ($10 million for couples) and the tax rate has been lowered to 35%. This means that you can leave $5 million to your heirs free of federal estate tax and that most married couples can leave up to $10 million free of federal estate tax.

For gift tax, the new law changed from the $1 million Lifetime Gift Tax Exclusion in 2010 to a $5 million Unified Gift Tax Credit. The new law creates an important planning opportunity. This means, as of 2011, individuals will be able to make gifts of $5 million ($10 million for a married couple).

The value of your estate includes all of your assets (ex: cash, investments, your personal residence, other real estate, etc.) generally determined at the fair market value on the date of death. Since the law may revert back to $1 million, serious tax planning is necessary if your assets exceed the $1 million.

As stated earlier, the provisions are temporary. They are assured for this year and next. If the law is not extended or amended, it will sunset and the Federal estate tax exemption will revert back to $1 million with a maximum tax rate of 55%!

It is important that you consult an accountant and/or a financial planner to make sure you are minimizing Uncle Sam’s bite from your estate, so that you leave the maximum number of dollars to your loved ones. If you need a referral to a solid advisor, reach out to your loan officer…they should have one on their team.

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7 replies
  1. Terry Goodwin
    Terry Goodwin says:

    I would like to see an honest and unbiased explanation of why the Federal Govt. deems it necessary to tap into personal assets, other than actual income, that they are not tied to in any way. The assets of an estate are intended to be disseminated to designated heirs. Why does the Fed feel they deserve a portion of it in the form of an estate tax? And, if I want to offer a gift for X amount of dollars, why do they feel they should garnish a portion of it. Today’s blog got my blood boiling. This intrusion in our lives is a big sore spot with me. Our country needs funds to function, but it has gotten totally out of hand.

    While I’m at it, why should the Fed benefit from a company bonus intended for me, and other’s of modest means, for going above and beyond the call? This is yet another intrusion in our lives. It isn’t just a small amount either, but a large chunk of it! Grrrrrrrrrrrr…


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